Fund raising plan lifts Motherson 5%, is acquisition on cards?

Moneycontrol Bureau

Automotive products manufacturer Motherson Sumi Systems shares rallied more than 5 percent intraday Thursday on fund raising plan approved by the board of directors. The board meeting comes in before its announcement of quarterly earnings next week.

The company is planning to raise upto Rs 3562.5 crore through various instruments. It said that fund raising is to enhance long term resources to support growth potential and to have option to raise capital at an appropriate time.

"The board decided to sought approval from shareholders for "preferential allotment of upto 1.78 crore equity shares or issue of foreign currency convertible debentures (FCCB) of an amount upto Rs 562.5 crore to Sumitomo Wiring Systems (SWS), Japan and qualified institutional placement for an amount not exceeding Rs 3,000 crore."

The meeting of shareholders will be held on August 31.

Motherson Sumi said that the fund raising plan falls in the scheme of vision of 2020, in which it has set a target of becoming USD 18 billion company by 2020 after growing a CAGR of over 40 percent in the last 10 years.

Considering the debt position and current fund raising plan, analysts feel the company may be looking for acquisition or major restructuring as current debt to equity ratio is comfortable at 0.77x.Brokerage house IDFC feels acquisition could be on cards as the management had earlier indicated its 2020 revenue target will be met through inorganic acquisition.

According to the brokerage firm, the acquisition can be in North America where its presence is low. Currently US market contributes 10 percent to overall revenues.

Recently there have been some media reports indicating that Motherson can also be looking for restructuring, wherein it may merge Samvardhana MothersonAutomotive System Group BV (SMRPBV) with company. If it happens, then shareholders will own 100 percent stake in SMRPBV post-merger against 51 percent now.Consolidated debt on books stood at Rs 4,406 crore at the end of March 2016, down 7.1 percent compared with Rs 4,745 crore in FY15 while revenue grew by 10 percent YoY to Rs 38,033 crore in FY16 and profit jumped 48 percent to Rs 1,274 crore.

Earlier it has diluted only once in 2005-06 by issuing FCCB of euro 50.3 million after maiden IPO in 1993.

As per latest shareholding pattern (June 2016), promoters held 65.61 percent stake in the company, including Samvardhana Motherson International's 36.93 percent stake and Sumitomo Wiring Systems' 25.29 percent.The company already has over 145 manufacturing facilities. To meet the global customer demand, 17 plants are in different stages of completion across the globe, it said.

SMRPBV, which had approximately Rs 1 lakh crore order book at the end of March 2016, holds 100 percent stake in subsidiaries Samvardhana Motherson Reflectec (SMR) and Samvardhana Motherson Peguform (SMP).

Motherson, which on consolidated basis has revenue of over USD 5.5 billion, acquired many distress companies like Visiocorp (that now known as SMR) in 2009, Peguform (that now known as SMP) in 2011 and turned them around in a short span of time.

Additionally, its subsidiary Samvardhana Motherson Automotive Systems Group BV has launched proposed tap issue of USD 100 million (USD 150 million capped) senior secured notes offering (additional notes) to form a single series with the USD 300 million 4.875 percent senior secured notes due 2021.

The additional notes are rated BB+ by S&P and are jointly & severally guaranteed on a senior secured basis by certain of the company's subsidiaries.

Meanwhile, the company will announce its unaudited financial results for April-June quarter on August 10.

At 10:34 hours IST, the scrip of Motherson Sumi Systems was quoting at Rs 345.05, up Rs 15.80, or 4.80 percent on the BSE.