Motherson Sumi System’s desire to grow business is hitting highs, COVID-19 notwithstanding. The auto parts manufacturer wants to triple revenues to $35 billion over the next five years and develop new business segments like aerospace, defence, information technology and healthcare.
Senior executives of the Delhi-based manufacturer spoke about the company’s plans for the next five years (till FY25) in an analyst call as the previous five year plan got over with the end of FY20. The previous five year plan which started in FY16 was to achieve a three-fold increase in consolidated revenues to $18 billion but it closed well short at $12 billion.
A detailed roadmap for FY25, five year plan will be shared by the company in the September quarter at an investor conference including a shift to plan 3CX10 wherein exposure to any country, component or customer should not be more than 10 percent of the total turnover by FY25. This matrix was 3CX15 for the previous five year plan.
“We are at about $12 billion (turnover). I think we are not going to extend that 5-year plan, but the next 5-year plan that we will come out will definitely give you an idea that we will try to cover up for this particular 5-year plan”, said Vivek Chaand Sehgal, Chairman, Motherson Sumi Systems (MSSL).
Keeping aside Rs 2,000 crore as capital expenditure (capex) for FY21 which is the lowest in four years, the 2020-25 plan will see the company building its expertise in non-automotive areas most of which will arise from inorganic acquisitions, believe analysts.
“We have decided that the next 5-year period we will diversify the group even further. While the focus will always remain on automotive and we have aggressive growth target for it, we also believe that the group hasn’t built enough synergies and expertise in areas such as engineering, manufacturing competencies, IT and in general, be able to contract manufacture. All these expertise will help propel us in the next 5-year plan to go after industries and set our mark in places like aerospace and defense. Full team has already been set up, and we are looking at opportunities of expanding that business,” said Laksh Vaaman Sehgal, Non-Executive Director, Motherson Sumi Systems.
The company has already set up a team for the health care division which has become an independent business vertical. A recently changed management at the information technology vertical will be tasked to grow the business. The company formed a new joint venture in the logistics division which it hopes push the agenda of diversification further.
“MSSL is targeting $33-35 billion revenues (about Rs 2.3 lakh crore) by 2025 with an unchanged RoCE focus (40 percent). We feel such an achievement would depend upon success of inorganic acquisitions and unhampered kit value increase in chief products like wiring harnesses and mirrors”, said ICICI Direct report.
With about 18 acquisitions (domestic and abroad) completed since 2002 MSSL is the biggest auto component making company in India and the most active in the mergers and acquisition space. The company was actively looking at targets before the COVID-19 pandemic wreaked havoc.
“We have a lot of opportunity, but it's not what you would imagine for the simple reason that governments all over the world have given or virtually thrown money to help out companies. So even companies, which were almost on the verge of being taken over February, March, have got a new lifeline”, added Vivek Chaand Sehgal.
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