Work in progress the best way to describe Motherson performance this year: Vivek Chaand

“Motherson does not have any plants in Ukraine but the other suppliers have a lot of focus on production in Ukraine. So a lot of things are happening in favour of Motherson and we are going to get more orders, more opportunities. So I am rather pleased about PKC. The margins, sales and everything is doing better,” says Vivek Chaand Sehgal, Chairman, Motherson Sumi Systems.

You highlighted in your earnings release that supply side disruptions and Covid restrictions impacted the production in key markets like Europe as well as China. What is the situation currently on ground?
Definitely there are tremendous amounts of challenges and the problem is that the challenges are only getting tougher in the coming times. So under the circumstances, the company did its best trying to mitigate these particular rising challenges by putting a tremendous amount of effort in cost control and a little bit of increase in inventory and things like that.

I think the situation at the moment is still dynamic because of the issues that are there and the war in Europe means some particular countries are in a little bit of a hot spot. The energy cost has gone up 10x, freight costs have gone up 7-8x, inflation is a huge problem. Just for example, in a country like Mexico the wage costs have gone up almost 22-24%.

But on the flip side, there are some great stories like India to some extent. There are some greenshoots and there are very good results. Work in progress is the best way I can describe our performance for this year and even now, the improvements on recoveries and all that will happen in the coming quarters.

So yes, we have to take the brunt of it and hold the fort but in the coming one or two quarters, recoveries will start. I think there is light at the end of the tunnel.

Your PKC business has shown improvement on a sequential basis but earlier, there were some challenges as well. What is helping the recovery and how do you see this moving ahead?
Actually PKC is much better than the last quarter. Their quarter-on-quarter revenues are up, EBITDA is up and PPT and everything are almost returning to pre last quarter situation. We are in fact rather pleased that PKC is working. The customers have also understood the situation.

Motherson does not have any plants in Ukraine but the other suppliers have a lot of focus on production in Ukraine. So a lot of things are happening in favour of Motherson and we are going to get more orders, more opportunities. So I am rather pleased about PKC. The margins, sales and everything is doing better.

We are also seeing the outlook on your EV order book building up quite well. What is the target for FY23 and which markets are the most supportive?
That is where the good news is. Our order book has gone up to $16.1 billion and the EV percentage has gone up to about a quarter of that. So within the next three to five years, EV will start to become almost a fourth of the order book. At this moment, it has improved from 3.4% to 4%. The guidance we had given six months ago was about 15.6%. The new order book stands at $16.1 billion.

What about the situation when it comes to the semiconductors in Europe and back home as well?
We felt that by September-October this year, the semiconductor issue would be conquered but there are some new challenges that have been thrown in with the war situation. But otherwise, it might get delayed by a quarter more. So maybe December-January might be the right time by which we can see some amount of relief coming in.

But the good news is that almost every day the situation is getting better and so I am very hopeful. I am an optimist and so I am thinking of September but in the worst case maybe December.