Auto component maker Motherson Sumi Systems Ltd (MSSL) has raised €80 million (around Rs 500 crore) through overseas borrowings for the purchase of a majority stake in German plastic component firm Peguform.
“The acquisition is being financed completely by external borrowings. Peguform will be included in MSSL's consolidated balance sheet by the third quarter of 2011-12.
Polymer biz integration
It will help in the integration of our polymer business and support us in moving to higher value modular products,” MSSL's CFO, Mr G.N. Gauba, said during the first quarter results announcement.
Earlier this month, MSSL had announced the purchase of an 80 per cent stake (jointly with Samvardhana Motherson Finance) in Peguform from Cross Industries AG. The deal, which is valued at €141.5 million, also includes a 50 per cent stake in another Cross Industries company, Wethje Carbon Composite.
The Samvardhana Motherson Group already manufactures similar products such as plastic injection molding, door and instrument panels and pumpers. This acquisition would give it access to new technologies and help it address more premium clientele such as BMW, Porsche and Daimler, through Peguform's 17 plants globally.
Q1 Results
MSSL's consolidated net profit for the quarter ending June 30, 2011 rose 10 per cent, even as consolidated net sales went up 22 per cent.
Profit growth was impacted on account of overseas subsidiary Samvardhana Motherson Reflectec (SMR) posting a 79 per cent drop in profits to Rs 3 crore, though sales for the auto rearview mirror maker rose 20 per cent to Rs 1,293 crore. MSSL's domestic sales rose 34 per cent, eve as exports grew 15 per cent.
“Even in a slow market, our sales have grown. The profits were impacted as the tax rate for SMR is higher and there is a start up cost involved for the three new SMR plants that are coming up. By the fourth quarter of the fiscal, SMR's profits will show growth,” Mr Gauba said.
The Group is investing around 50 million Euros in SMR. A new plant in Hungary is to start operations in the current quarter, while two more in Brazil and Thailand will also begin production this year. SMR, which was acquired in 2009, has around 15 plants globally.
MSSL is investing a total of Rs 650 crore this fiscal, part of which is for setting up four more plants. While one will be in South Africa, three more are being built in the NCR region.
MSSL's shares at the BSE fell 3.71 per cent to Rs 229.95 on Friday.