The weakness in the euro will not have a major impact on the earnings of Motherson Sumi Systems, the auto ancillaries firm’s chairman Vivek Chaand Sehgal told CNBC-TV18 in an interview.
He said the company was seeing strong demand for its products in the Europe, which accounts for around 42 percent of total sales. Sehgal said he remains bullish in his outlook on the European business.
Around 75 percent of Motherson's loans are in euros. Sehgal said the quantum of euro-denominated loans was around 750-800 million.
He expects the group’s revenues to rise to 7 billion euros by the end of this calendar, adding that a fresh guidance would be given at the time of the annual numbers in this May.
Sehgal said group companies Samvardhana Motherson Reflectec and Samvardhana Motherson Peguform have won around 2 billion euros worth of orders.
Below is the transcript of Vivek Chand Sehgal’s interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.Sonia: Talking about the European Central Bank (ECB) stimulus and the benefit that it could have for companies like yours, but could you start by explaining to us what the fall in the euro could mean. The euro is sitting at 11 year low versus the dollar. What kind of impact would it have on a company like yours?A: At the end of the day whatever the fluctuations in the currency are, they do not have a real impact as far as we are concerned because they are translation gains or translation profits because our balance sheet and everything is in Indian rupees, so there might be an effect that the sales may look a bit muted or maybe the loans will also look a bit more muted. However, 80-85 percent of our business is outside, so it’s a part of life, we have to make our balance sheets in Indian rupees, so just translation as far as we are concerned.However, for the company, we have just taken our loans in euro bonds, so in that sense it is a big positive.Latha: Give us details about how much of your revenue comes in euro, what percentage of your revenue is denominated in euro and how much exactly the euro loans is, as well what percentage of your total loan is in euro A: Almost about 75 percent of our loans are in euro and as far as our sales are concerned approximately about 40-42 percent would be in euro but I am giving a rough figure because we do not do this too much in details.Latha: When you say 75 percent of the loans, can you give me a number as to how many million dollar of loans?A: We have just done a bond issue of USD 500 million plus also we had taken some other loans, so approximately about USD 750-800 million euro for working capital, for bond and all those things were done in euro.Latha: What would be your interest outgo in euro in a year and more importantly would you normally hedge any of your earnings in euro?A: We do not hedge the currencies too much because it can go either way. We are buying in euro, we are selling in euro and so for us it doesn’t make sense to hedge it in rupees.Sonia: Can you tell us about the situation in Europe as far as demand is concerned. What could be the growth going ahead since the ECB has decided to pump in so much money. So there is an overall expectation that that growth will pick up there and since you have already surpassed your revenue guidance for 2015, what is the expectation by the end of this year, where will the group revenue stand at?A: The group would be standing close to about USD 7 billion plus or something like that depending upon where the euro and the rupee settles. So that’s another thing that we have to keep in mind but by and large something like USD 7 billion plus euro, the group’s total turnover would be somewhere there. The other question you were asking about the demand in Europe - all along for the last quarter we have been saying that we are having very good traction, we are having excellent demand for our products but now the numbers are proving us correct that we are having a good demand and good traction in Europe. So, for us it is good. However, even a country like Greece, last year they have grown 21 percent, a year before that was a bit low, but they have also bought more than 21 percent more cars. The mood is very good, thing will improve. These things happen but I am very positive about Europe. Europe will do very well. Sonia: The last time we spoke with you, you had indicated that during April-September period Samvardhana Motherson Reflectec (SMR) received new orders to the tune of USD 1.3 billion euro. Can you tell us what the total order book stands at right now and what are the fresh orders that you have seen for both SMR and Samvardhana Motherson Peguform (SMP)?A: We have guided you on that. There is an additional USD 2 billion worth of new orders between both the companies. We will give a fresh guidance around May when we come up with our yearly figures and Q1 result will also come out.At that time we will try and give you new figures that are coming because the orders are coming in and everything is happening and we cannot keep up with guiding it. So every six months we give guidance.
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