Motherson eyes acquisitions as pandemic presents attractive opportunities

Auto components major Motherson Sumi Systems Ltd (MSSL) is gearing up to bring in more entities under its fold with many companies looking for partners or acquirers due to challenging biz environment

Auto components major Motherson Sumi Systems Ltd (MSSL) is gearing up to bring in more entities under its fold with many companies looking for partners or acquirers due to challenging business environment amid the coronavirus pandemic, according to a report.

The company, which currently has over 230 facilities across 41 countries and five continents, is in talks with many potential companies for takeover.

"We are in a strong position to make acquisitions, even in a volatile environment. Our balance sheet has become stronger since OEMs started re-opening their plants beginning last October, and we could begin ramping-up again" MSSL Chairman Vivek Chaand Sehgal informed the company's shareholders in the annual report for 2020-21.

He noted that the company's criteria for bringing new companies into Motherson has not changed due to the current situation.

"Acquisitions must create value for our customers and must allow us to achieve our revenue and ROCE targets simultaneously, among others. In other words, we will not make acquisitions only to achieve our top-line goals," Sehgal said.

Thanks to unprecedented government stimulus packages around the world, the economic impact of the pandemic on vulnerable companies seems to be less severe than would have been the case otherwise, he noted.

"Nevertheless, many companies are looking for partners or acquirers, and we are actively seeking opportunities that best fit the requirements of our customers. We continue to believe that the economic circumstances created by the pandemic may make the available opportunities more attractive in the coming times. This is especially so, when government support programmes are eventually scaled down," Sehgal noted.

He added that despite the pandemic, the company's organic growth also remained robust.

"Our order book across the world is strong and growing. Our operating cash flows are healthy and as on March 31, 2021, our net debt is lowest in the last 17 quarters," Sehgal said.

He noted that its stated goal -- Vision 2025 target a topline of USD 36 billion with 40 per cent ROCE (return on capital employed)-- is ambitious.

"Achieving it will require closer teamwork, intense sharing and a spirit of growing together. We are moving into new geographies, entering new markets, forming new partnerships and taking on new clients, and as a family, we are stepping up to meet these new challenges together," Sehgal said.

As per its five-year plan, MSSL has set a target of achieving consolidated revenue of USD 36 billion with 75 per cent coming from the automotive sector and 25 per cent from new divisions such as aerospace, logistics and health and medical segments by FY25.

The Motherson Group has grown continually over the past 28 years. Its topline has increased at a CAGR of 33 per cent since 1993.

It went up from USD 3 million in 1993 to USD 8.2 billion in 2021.