Moneycontrol
Last Updated : Sep 11, 2014 06:49 PM IST | Source: CNBC-TV18

Motherson Sumi eyes 15-20% topline growth, 40% RoCE in FY15

The auto ancillary company looks to set up 14 new plants in India, US and Mexico, out of which, production at 3 new plants will begin by September, says Vivek Chaand Sehgal, Chairman, Motherson Sumi Systems.


With umpteen orders up its sleeve, Motherson Sumi Systems expects 15-20 percent topline growth along with a 40 percent return on capital employed in this fiscal.


The global auto ancillary player looks to set up 14 new plants in India, US and Mexico, out of which, production at 3 new plants will begin by September, says Vivek Chaand Sehgal, Chairman, Motherson Sumi Systems adding that amongst all the markets, US and Chinese markets have picked up the most.


Motherson Sumi boasts of winning orders worth 7.7 billion euro worth over the last 3-4 years. Meanwhile, the company will announce its next 5-year plan in April 2015, he says in an interview with CNBC-TV18’s Ekta Batra and Anuj Singhal.


Below is the verbatim transcript of the interview:


Q: Since you have already achieved your 2015 revenue target of USD 5 billion in FY14 itself, what could be the fresh revenue target for the company?


A: It is not so easy to give you a number per se on that but we are looking anywhere between 15-20 percent growth on the top line for this financial year per se because we have three new plants which are going to come into production as of September-October. So how they ramp up is totally dependent upon the car maker. Therefore, we believe that 15-20 percent is not an issue. The group however could go up to 20-25 percent.


Q: Could you throw some colour on Samvardhana Motherson Reflectec (SMR) while we understand that the utilisation levels in new plants in Hungary, Brazil and Thailand have inched up higher, how much could the profitability of SMR increase going ahead according to you?


A: I think they are working very hard and we believe that overall, Motherson Sumi Systems is going to try and attack the 40 percent. While we have never done that on a consolidated basis over the last 20 years but we have come quite close, we have come to 39 percent as the closest. This time we are really going to try and make it 40 percent. So SMR is doing its bit, it is making sure that all the plants and everything which are under its command are going to do better. Profitability and things like that and eventually contribute to the 40 percent growth because we don’t give guidance on every single company per se.


Q: Which are the export markets now which are seeing the highest growth trajectory according to you and how much have things picked up on the ground?


A: USA is a great story, China is a great story, for us, India is a great story as well. Overall, Europe is growing pretty good, the euro is weakening which is even better for the car makers in Europe. So overall we see great numbers coming in from US and China then of course Europe and India doing equally well in most of the cases.


Q: Your annual report indicates that you will expand operations in China and other markets. If you could give us some numbers in terms of how much you will increase your capacity?


A: Capacity is a very difficult term for us to quantify our products for the simple reason we are exactly what the carmaker wants us. So even though we can produce more but we don’t. So capacity is not the right measure for Motherson. However as we speak we are at this particular moment looking at about 14 new plants coming up all over the world including India, including USA, Mexico.


Last week, we laid the foundation of one of the biggest plants that we will set up for Audi near Mexico City. So we are continuously putting in a lot of new plants and things like that because we have to be close to where the customer is. So that is to commensurate with the 7.7 billion euro worth of orders that we have already announced over the past three-four years. So we are preparing ourselves for the new car numbers that are coming globally plus also there is a lot of shift that is taking place, people are shifting the models closer to where the markets and all those things are. So I think in that particular sense we are very much in line with what we have been projecting. Over the past 20 years, we have grown at a Compound Annual Growth Rate (CAGR) of plus 42 percent. So we will continue that in the next five year plan that we will announce in April 2015.


Q: How is Peguform doing, can you give us an update in terms of what the fresh orders are looking like for Peguform?


A: There is a lot of traction for SMP. Last quarter they did spectacular results. Both SMR and SMP have done a very successful bond issue; they have been very well received by the investors. There is a tremendous amount of confidence that these companies will do well and I can assure you that they will do very well. SMP by itself has also announced its orders already six months ago and in the coming quarter we will give you a bit more flavour as to what the new numbers are going to be like. I think the basic plants of SMP have started to improve, we have solved a lot of the problems, the newer plants are also going to come into production. We have a brand new plant near Munich. It is a huge plant and this plant will come into production around end of September and then based on the customer, how the customer ramps up these guys will do as good as what the customer will ask them to do. So it is not a capacity game but yes S&P has all the right technologies, it has the right placement right next to the customer. The customer has already given the orders to them. So it is just the customer getting up and going and we are going along with them.


Q: Now you are entering into a very highly lucrative US market via your acquisition of Stoneridge. What could be the revenue contribution from that space?


A: If I was to tell you that there was a key which opened up the US market, well that is the division that we have bought from Stoneridge. I think what it does is it puts us firmly into US. We have close to six plants in Mexico; we have one plant in US. Once you are in US the opening up of the American market becomes that much more relatively simpler because you are an American company talking to American customers.


Most of their customers which are there are already our customers in India or in Europe or in different parts of the world. So we just have to connect with them, they already have told us that we can expect very good businesses with them because they have a lot of confidence in what Motherson does. But will it happen tomorrow, I don’t think so. I think it is going to take a bit of time, six months, one and half years and then you start to build on that particular thing. So. the 20-20 target USA is a big thing for us and it is one of the biggest markets that we want to get into and this particular acquisition will open the door for that particular thing. Our marketing people, the different products that we are making in India have a ready market in the USA and that is what we are doing to be doing. Therefore, we are doing a lot of cross-country selling, cross product selling, cross customer selling will happen because of this particular acquisition.


Q: How much could the revenues in the US go up considering you have a new plant coming on stream as well?


A: SMR already has an existing plant there right from the beginning, they just doubled it about a year and half ago and now they have again doubled that. So that gives an idea of what kind of traction we have in the US market already. So in the coming two years you will see very strong performance coming from SMR USA per se and SMR Mexico and Brazil.


Q: Your consolidated debt rose by Rs 260 crore to Rs 4200 crore in the quarter gone by. How much do you plan to reduce debt to by the end of this year?

A: There is a little bit of clarification that we would like to give. See with the debt of SMR and SMP being taken by themselves, definitely we on a consolidated basis will show that debt but it has no recourse to Motherson. So actually Motherson is virtually debt free now, only Rs 1500-2000 crore debt left and that is normal, it includes working capital, we expense out a lot of our R&D and everything over there. So if you look at how conservative we are when we talk about debt, actually there is hardly any mentionable debt that is there on our books. So we are very comfortable, we have no plans to do anything to reduce our debt because it isn’t there actually.

First Published on Sep 11, 2014 12:32 pm
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