Motherson Sumi Systems spurts after board gives in-principle nod to raise Rs 1,000 cr

Motherson Sumi Systems (MSSL) jumped 15.60% to Rs 73 after the company said that its board approved to raise up to Rs 1,000 crore to secure liquidity while dealing with the global coronavirus pandemic.

MSSL announced on 13 April 2020 that the COVID-19 pandemic represents an unprecedented disruption to the global economy and world trade, as production and consumption are scaled back across the globe due to preventive directives from authorities world over. COVID-19 outbreak continues to grow in many areas of the world with severe toll on health. In light of this, MSSL said it has taken a holistic approach to protect the interest of various stakeholders including employees, customers, investors and societies where it is present.

The company said it is in close contact with all its customers and receiving regular updates on plant reopening dates and customer schedules. Most customers are wanting to catch up on the lost production time in the coming months due to pent up demand. "We are seeing positive development on demand coming from our China plants which went first into shutdown but have since recovered production levels to nearly pre COVID-19 times soon after starting up. This is a very positive indication for our industry," MSSL said in a statement.

The company said that most of its plants in India, Europe and Americas are currently temporarily closed and it has received positive reopening dates for vast majority of the plants by end of April / early May. However, since it is a dynamic situation, there could be further delays in reopening plants in case the local governments extend lockdowns, of which there are no current clear indications, it added.

The company reported that its 31 March 2020 net debt levels has been the lowest in eleven quarters. The company's consolidated net debt level as on 31 March 2020 stood at Rs 7,150 crore. It included Samvardhana Motherson Automotive Systems Group B.V. or SMRP's, in which MSSL holds 51% stake, net debt of 702 million euros.

MSSL said that its consolidated cash as on 31 March 2020 stood at Rs 4,690 crore, out of which SMRP reported cash reserves of euros 412 million for the period.

"We have adequate headroom in our bond documents to utilize the above and there are also no major maturities of debt in the next 12 months," the company said in a statement.

To further enhance liquidity in these uncertain times, the board of directors has accorded in-principle approval to raise up to Rs 1000 crore and delegated its committee of directors to evaluate and decide on various borrowing proposals. The firm is also proactively working to leverage on various government support schemes to enhance liquidity.

It also added that it has already completed its major capex investments in the last fiscal and that any new future capex requirements would be aligned with the new product launch schedules of its customers.

The company also updated that Samvardhana Motherson International or SAMIL, which owns 33.43% in MSSL, has paid part of latter's debt and subsequently 3.05 crore MSSL shares are expected to be released from pledge this week. It intends to pay back more facilities from internal accruals and dividends going forward.

"Our team has done a phenomenal job in almost doubling MSSL's turnover over the last 5 years to $9.6 billion / Rs 63000 crore on an unaudited basis, said MSSL's chairman Vivek Chaand Sehgal.

"Our aspirational 5-year plans cannot be timed perfectly, and the unprecedented COVID-19 situation has hindered us in closing many target acquisitions. However, we believe that these same opportunities have become more attractive invaluations since the COVID crisis. Secondly, with our strong financial position and with customer faith intact, we are also being asked by many of our customers to look at more specific companies which are in trouble and we believe can be acquired at low valuations. We wanted to showcase our plans to the investors in June but keeping in mind the current environment, we will probably do so in October. We are grateful to all the customers, government bodies and our financing partners for their support in these trying times," he added.

MSSL's consolidate net profit slumped 30.47% to Rs 270.51 crore on a 4.91% fall in net sales to Rs 15,436.46 crore in Q3 December 2019 over Q3 December 2018.

MSSL is one of the world's leading specialized automotive component manufacturing companies for OEMs.

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