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    Biz rejig takes care of all concerns of Motherson Sumi stakeholders: Vivek Chaand Sehgal

    Synopsis

    ‘Sumitomo wanted their focus only to be on the domestic wiring harness business for which this JV was set up 37 years ago.’

    Vivek Chaand Sehgal, Motherson Sumi-1200ETMarkets.com
    We believe in local management, local company, local place and we have been doing it for the past 16 years now, says Chairman, Motherson Sumi.

    The domestic wiring harness (DWH) business of Motherson Sumi is being separated into a new firm that will eventually be listed. What prompted you and your board to come out with a reorganised structure? What was the thinking behind this move?
    First of all, it has been a long journey. We started somewhere around 2012 January. The board constituted the committee for restructuring and because it is a very complex kind of situation with multiple needs of different stakeholders, it was always a challenge.

    About four years ago, we had almost come to a solution but then the government changed the laws and that thing had to be written off again. In January, we thought it was convenient to come in because circumstances were such that we could actually achieve almost 90% of what the stakeholders wanted. This includes Sumitomo who is our teacher and collaborator, who wanted their focus only to be on the domestic wiring harness business for which this joint venture was set up 37 years ago.

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    Then we have a lot of shareholders who are worried about minority interest and this and that and cross-holding etc. So how do we align all these requirements together? So the board mandated the bankers, the lawyers and the advisors and they could then come up with a solution which they did. As of yesterday, they made the presentation which I think is a solution for many of the stakeholders. By this solution, Sumitomo SA gets what they want. We take care of all the concerns of different shareholders. We have listened to their concerns in the last eight years and then we have brought together all of this, including the wiring harness portion ownership, in Samvardhana Motherson International Limited (SAMIL) which is the new Motherson Sumi.

    What is in it for shareholders? How do you see this creating value for the long term in terms of returns and how do you think that this is going to be in EPS accretive move?
    The group has a very aggressive target for the next five years and with this vehicle, we are free to take up those challenges and grow the top line where we want to. The wiring harness business of Sumitomo SA remains focussed in India and it is only related to servicing the customers in India.

    The possibilities are huge but globally the new Motherson Sumi which will be formed, once all the approvals and things are done, would be absolutely free. It can go ahead and do whatever it wants to achieve, whichever customer it wants to take care of, everything is possible. So, it serves as a huge opportunity for all the shareholders in new Motherson Sumi to really experience the ride, as we call it.

    Post the demerger, what will be the roadmap for Motherson Sumi Systems Ltd (MSSL) and its key businesses?
    Domestically, there is a need for a tremendous amount of focus on the new vehicles that are coming -- the hybrid vehicles, electric vehicles, whatever path the customers is going to choose. So very specialised components, specialised wires will have to be done. This particular company will be focussing on that and taking care of the immense growth which is going to come in the domestic customers demands. The domestic wiring harness business will do very well because it will focus on the needs of the Indian car makers.

    Does the move help you to pursue or streamline your M&A strategy? Is it likely to give you more freedom in buying assets going forward?
    What is very important is that a lot of people think that if the domestic wiring harness business goes out of SAMIL or the new Motherson Sumi, then they will fail to catch the growth in India. So SAMIL has brought in all its joint ventures, incubations which we have done for the past 10-12 years. Those are very profitable and have been brought into the new Motherson Sumi. Our new target will be 3CX10 which means no country, no component, no customer to make up more than 10% of our turnover.

    We are bringing in a lighting joint venture; we are bringing in Fritzmeier, which is into cabins and things like that. We are also bringing in MIND, which is our software backbone. So a lot of new exciting companies, which we have incubated over the past 10-12 years, are also coming into the Indian side. Globally, the sky's the limit.

    The global market is around $200 billion. The ability to take over companies which are available in these particular fields outside India makes us that much more powerful because we have already got 10-12 years of experience in that particular business. So it is very exciting for both the companies.

    You have stated that “the merger of SAMIL now aligns with the pursuits of inorganic growth opportunities.” Is there any strategy when it comes to future acquisitions post the demerger?
    Yes, I just gave you the four-five companies that we are bringing in. There are endless possibilities in the $200-billion global market. Motherson is always increasing the content per car and so the opportunity is even bigger.

    In 2008-2009, when we took over a company which is now known as SMR, that particular business was negative in EBITDA and all that. The Indian joint venture was less than Rs 10 crore or Rs 20 crore. We took over the company of $500 million because we had done seven-eight years of work in that particular joint venture. Today that company is worth $1.6-1.7 billion. We have repeated that in many instances. So, that is the opportunity that we bring to the new company.

    Motherson never has a strategy, we have a great timely response. That is the difference between us and the other people who go for acquisitions. Motherson does not strategise. We just follow the customer. The customer is telling us to go a certain way and we just go blindly and then the customer is there to support us.

    Will you continue to look at international opportunities in the wiring harness business if it has no clash with Sumitomo in the new scenario?
    PKC and MWSI are both in America and so there is no conflict at all and the domestic wiring harness business is only for India.

    What is the opportunity seen on the back of government initiatives like Make In India, Atma Nirbhar Bharat? You already have the scale, the technology that is required to contribute to the mission of self reliance. Do you see this as an opportunity to take a bigger leap?
    Thank you for asking this question because this will tell you how forward looking Motherson is. We have 270 plus facilities in 41 countries. There is no better example of globally local than Motherson. If today, we are exporting something from India and we feel that the percentage of exports has exceeded a particular cut off ratio, we will close the plant in India and shift to wherever we have to go or we will continue the plant here -- whatever the customer wants. But we do not believe in imports and exports because it is unnatural to believe that only one or two countries are going to have the global manufacturing plants. We have been vindicated.

    The key thing is Motherson Sumi believes in local management, local company, local place. So, we are truly focussing on that and we have been doing it for the past 16 years now. So trust me, we are very happy with this particular trend because we could identify this long ago. We have lots of plants in China, but we do not export even $1 worth goods from China. It is about local consumption. It is the same in India, Europe, America or Mexico.



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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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