Vivek Chaand Sehgal, chairman, Motherson Sumi
Image: Amit Verma
Motherson Sumi is at it again. India’s largest and most globalised auto component company by market capitalisation, is doing what it does best. Acquiring companies, turning them around, and, in the process, creating wealth for its shareholders.
The Vivek Chaand Sehgal-led company has submitted an open offer for PKC Group Plc, a Finnish truck wiring harness maker in a deal valued at Euro571 million (Rs 4111.2 crore). PKC’s board has recommended that shareholders accept the offer. Motherson expects to acquire all the outstanding shares in the company and expects the transaction to close in March 2017.
The PKC acquisition comes after the company acquired three businesses in 2015 – Stoneridge, a US wiring harness maker and two German companies Minda Schenk and Scherer & Trier. In a conference call with analysts Sehgal said, “We’ve learned our skills with the Stoneridge acquisition and turned it from a loss making to a profitable company in eight months.” He was confident the company has what it takes to make the PKC acquisition a success. That seems likely as Motherson always acquires companies when its customers (carmakers, truck makers, two-wheeler makers) ask it to acquire. It also marks their entry into the truck wire harness market.
Over the years Motherson has steadfastly ensured that it sticks to growing its revenue by 40 percent every year and at the same time makes a 40 percent return on capital employed on every business it acquires
. As a result, its stock has compounded at 49 percent over the last five years taking its market capitalisation to Rs45, 800 crore.
The company has now released its Vision 2020 plan under which it aims to take the business to $18 billion in revenues by 2020. At the same time no country, customer or component should be more than 15 percent of revenues.