The completion of the 18 month-long mega restructuring exercise at the Sehgal-family controlled Motherson Sumi Systems (MSSL) has paved the way for an organisation that will accelerate growth through inorganic ways.
The restructuring, which started in July 2020 and has led to creation of two companies, is done to simplify group structure as well as align itself for ‘Vision 2025’ which targets revenues of $ 36 billion with 40 per cent ROCE.
Motherson Sumi, India’s largest automotive parts manufacturing company, has been the most aggressive of Indian companies to chart expansion and growth through acquisitions over the past several years. The company has made 27 acquisitions till date in the automotive sector and beyond.
Speaking to analysts, Vivek Chaand Sehgal, Chairman, MSSL, said, “The improved structure will help us to grow further, be of more value to the shareholders and create more synergies. The inorganic opportunities are increasing dramatically. Covid has carried on for the second year now. Motherson will get a lot of opportunities for acquisition.”
As per the ‘Group Reorganisation Plan’ the domestic wiring harness (DWH) has been demerged from MSSL and is now in the process of being listed. SAMIL will hold 33.4 per cent in DWH company. Samvardhana Motherson International (SAMIL), the principal holding company of the Motherson Group, has been merged into MSSL. Requisite shareholder and NCLT approval have been taken by MSSL for the process.
Diversifying revenue streams is a part of the Vision 2025 of MSSL. The company targets 75 per cent of the revenue to come from the automotive industry and the rest from new divisions.
As of end September 2021, the non-automotive business made up 0.3 per cent of the revenue share of MSSL, which was ₹35,270 crore.
In October, MSSL acquired a controlling stake in CIM Tools, a company that supplies components to the aerospace industry, for an enterprise value of ₹ 400 crore.
Laksh Vaaman Sehgal, Group Vice-Chairman, MSSL, said, “The acquisition (of CIM Tools) showcased that we are very serious about this and this was also our first acquisition which creates a path of much larger ones to happen in the future. This will also establish ourselves as a key supplier with a large aerospace player. We believe that in the next five years we can grow this business substantially and also deliver 40 per cent growth.”
Key focus areas
Motherson is looking to expand business in four key non-automotive areas. These are aerospace, logistics, technology and industrial solutions and health and medical. In the logistics space, the company has a joint venture with a Japanese premium car carrier. It plans to enter other verticals such as auto wagon (rail transportation), yard management and export logistics.
The technology and industrial solutions segment of MSSL aims to position itself as an IT services provider expanding to customers outside of the Motherson Group having offices in the UAE, Spain and Singapore.
In the health and medical field, MSSL aims to become a strategic partner for medical device OEMs, enabling manufacturing globally. This will be done through leveraging the group’s capabilities across the value chain along with three key areas – durable medical equipment, imaging systems and in-vitro diagnostics.
“We have quite large targets and for that we will be doing multiple acquisitions,” Laksh Vaaman Sehgal added.