Motherson Sumi slips 9% after board approves group restructuring plan

Promoter entity SAMIL would be merged into MSSL

Shares of Motherson Sumi Systems Limited (MSSL) slipped 9 per cent to Rs 94.30 on the BSE on Friday after the company said its board has approved a major restructuring exercise, under which the domestic wiring business (DWH) would be demerged into a new firm, which will eventually be listed. For every share held in MSSL, one share would be allotted in the new firm.

Moreover, the promoter entity Samvardhana Motherson International Limited (SAMIL) would be merged into MSSL, consolidating the group's automotive interests under the listed entity. For every 10 shares held in SAMIL (with face value of Rs 10 each), 51 shares of MSSL (with face value Rs 1 each) would be allotted. MSSL will be renamed as 'Samvardhana Motherson International'.

“The proposed reorganisation aims to simplify group structure and enable MSSL shareholders to benefit through 100 per cent stake in SMRP BV; create separate independent entity for DWH business with focused approach on this business; align interest of all stakeholders by bringing all auto component and allied businesses in SAMIL under listed entity; create strong platforms for growth,” the firm said.

Analysts at ICICI Securities believe the SAMIL acquisition is on the relatively expensive side compared to MSSL's own valuations. Moreover, 43 per cent equity dilution for the same (issue of 136 crore new shares on existing base of 316 crore shares) would be EPS dilutive. However, the deal would not entail any cash outflow, it said.

At 09:47 am, the stock of Motherson Sumi Systems was trading 6 per cent lower at Rs 97.30 on the BSE, against 0.21 per cent rise in the S&P BSE Sensex. A combined around 41 million equity shares have changed hands on the counter on the NSE and BSE, so far.

The stock price of the company has more-than-doubled from its 52-week low level of Rs 48.50, touched on March 24, 2020.