The gradual withdrawal of state-provided incentives to stressed companies by several countries will aggravate their financial pain leading to increased instances of acquisitions, believe Vivek Chaand Sehgal, Chairman of Motherson Sumi Systems (MSSL), India’s largest auto component manufacturer.

The Delhi-based maker of vision systems, wiring harness, lighting and electronics, could look into multiple acquisitions across segments – automotive and non-automotive – as part of the group’s promise to more than triple its revenue to $35 billion by FY25.

Grants helped survival

“Because of a lot of help given by governments outside of India, these stressed companies could survive that. We took over five small companies, then came the medium size companies, now the large companies will come. Now there is no government grant coming. The pain in the system is too much and there will be lots of acquisitions,” Sehgal said to BusinessLine.

29 acquisitions till date

Motherson has done 29 acquisitions till date. The last two buyouts came in October, one of which helped it venture into the aerospace industry while the other aided in expanding operations in China in the automotive space. The company has diligently followed its original equipment manufacturer (OEM) clients for acquisitions. Sehgal claims that MSSL bought only those companies which its clients asked to be bought. 

“Motherson Sumi has bought companies which the carmakers wanted us to buy. The customers are asking us to take over companies and when we do that with the customers backing, the success is by and large, easier. A lot of companies have tried acquisitions and failed miserably,” Sehgal added.

Motherson Sumi Wiring India (MSWIL), the demerged entity of MSSL, and the market leader in the wiring harness segment, debuted on the stock exchanges on Monday. The demerger was part of the ‘Group’s Reorganisation Plan’.  

Acquisitions during crisis

“We have lost two years but we are very much on track with the target outlined under Vision 2025. We have consistently acquired companies when the crisis was at its worst. In fact, in many of our acquisitions the customer paid us to keep their manufacturing lines running,” Sehgal added. The group is present in 41 countries and runs more than 285 plants. 

Vision 2025 has diversification at the centre of the strategic plan. Motherson is looking to expand business in four key non-automotive areas. These are aerospace, logistics, technology and industrial solutions and health and medical. Acquisitions are set to happen in these areas also.

Capex

Samvardhana Motherson International (SAMIL), the principal holding company of the Motherson Group, would likely see a capital expenditure ranging between ₹2,000 crore to ₹2500 crore in FY23. A further ₹150 crore capex could be undertaken by MSWIL in the coming year, informed senior executives of the both companies.

Kunal Malani, Group Chief Financial Officer, MSSL said, “We are seeing a lot of volatility across the globe, and changes happening almost on a daily basis. The capex should lie between ₹2000 to ₹2,500 crore (for FY23). From the current order book perspective, we have the manufacturing facilities (required). There are no major green field manufacturing plants undertaken. Hence, we have the flexibility of managing the capex depending upon how the market is playing. In a normalised environment that’s the capex we will work with.” 

Till the end of the December quarter, SAMIL saw a capex of ₹1,700 crore. Capex for full FY22 will be shared by the company at the time of announcing its March quarter results.