When Motherson Sumi listed in 1993, it raised a paltry $700,000 from the market. The company had clocked Rs 12 crore in revenue and there was little to suggest that it would go on to become India’s largest auto component company. Few had heard of the Delhi-based maker of wiring harness and, as a result, not many gave it much of a chance. Few had also expected it to become a producer of a sizeable chunk of what goes into a car—think mirrors, air-conditioning systems, bumpers, spoilers and more.
But promoter Vivek Chaand Sehgal wasn’t perturbed. He, instead, was preoccupied with other, bigger plans. Sehgal, chairman of Motherson Sumi, had just acquired a new toy—a desktop computer. On his Microsoft Excel sheet, he plotted the carmakers’ projections. And what he saw surprised him. If it continued growing at its (then) current rate, Motherson Sumi would be on track to clock Rs 100 crore (in revenue) by 1999.
Meanwhile, at Visiocorp’s offices, the effects of the worsening financial crisis were being felt all too clearly. “We saw things going from bad to worse,” recalls Vaaman. “First the lunch stopped, then the tea stopped and then the toilets stopped being cleaned.”
At the end of the month, Sehgal submitted an offer, agreeing to take over the company for free. Now Sehgal was not someone to overpay for a business. Case in point, in 2005, Motherson Sumi had raised a 50 million euro bond for acquisitions. The company had kept it unutilised as Sehgal couldn’t find a good deal to spend it on. Here, too, he’d reasoned that with Visiocorp bleeding cash, and with no buyers, the owners would be happy to offload.
He had miscalculated. This offer was summarily rejected by the eight hedge fund and private equity owners of the company. Father and son packed their bags and came back to India. With no certainty about the future, they believed there was no need to overpay. Or in this case, pay.
But as things got worse, the company’s customers continued to look at Motherson for a reprieve. The Indian company, in turn, continued to hold steadfast on its resolve to not overpay. Things got worse, another round of negotiations resulted in failure—and, in February 2009, The Economist reported an 82 percent decline in truck sales by Volvo. This served to drive home just how poor automobile sales were in Europe for Visiocorp’s customers.
Then, in March 2009, after General Motors announced bankruptcy, Motherson was called yet again for another round of negotiations. Pankaj K Mital, chief operating officer of Motherson Sumi, recalls an inspiring speech that Sehgal had made to his eight employees in Germany. “There could be a hundred reasons to not do this deal but even if there is just one reason to do it, we should,” Sehgal told them. Acquiring a company of a size comparable to that of Motherson’s during a massive slowdown in car sales was no small task. Even so, when the eight people were asked to vote, they all voted yes. “My father still has those pieces of paper that we voted on,” says Vaaman.
Inevitably, the post-purchase phase wasn’t a smooth ride. Sehgal realised that decisions had been taken with a short-term outlook and that the business was bleeding cash. In Germany, if a business runs out of cash, the chief executive is held liable and can even be jailed. At that rather tumultuous stage, Sehgal took a decision that shocked many within the company. He decided to name the then 27-year-old Vaaman as chief executive. “Of course we would never have allowed him to go to jail but that was the best training I could give him,” says Sehgal.
For the next four years, Vaaman was put through the paces. He toured Visiocorp’s (since renamed Samvardhana Motherson Reflectec) facilities relentlessly and worked on making processes more efficient. He learnt German. He also made personal calls to his customers—Volkswagen, Audi and Porsche among others—so that orders started flowing in once automobile sales resumed.
Within a year, Visiocorp was making a profit and today, it accounts for $1.3 billion in sales for Motherson. Not bad for a company that Sehgal acquired for $21 million at the height of the financial crisis. More importantly, with this acquisition, Motherson had gained global scale, global customers and global ambition.
The Secret Sauce
Motherson’s success can be traced back to three decisions taken by Sehgal in the 1990s. At that time, there was little that set Motherson apart from other component makers. Sehgal was not happy with the pace of growth and knew he would have to grow much faster than the industry to have a chance of becoming the largest. To that end, here’s what he did:
In 1993, the Rs 100 crore-target energised his team but Sehgal hadn’t put it down on paper. He knew it was a mistake and, come 1999, he wasn’t going to repeat it. This time he decided to aim for another ten-fold jump, to Rs 1,000 crore by 2005. He also said the company would maintain a 40 percent RoCE. “As a result of this, we started reviewing all our operations from a RoCE perspective. Every bit of machinery we bought was evaluated using this parameter. All inventory was stocked using this in mind,” says GN Gauba, chief financial officer at Motherson Sumi.
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(This story appears in the 24 July, 2015 issue of Forbes India. To visit our Archives, click here.)
I always wonder why Forbes or any other magazine considers only actors and sports person as celebrities. These are people who work for themselves. In fact its the business men big and small who create wealth and opportunities for the country and the people and they should be topping the celebrity list. Especially Motherson group chair person who has developed a business model generating revenue or 36000 crs and that too by keeping a low profile. What the actors are doing is just pea nuts in front of these business giants. In fact Forbes should change the definition of a celebrityon Dec 24, 2015
Hats Off to Shri V C Sehgal and his son Vaaman for thier Dynamic &Visionary Leadership for establishing & professionally leading Motherson Group to such heights. Congrats. Dewakaron Aug 6, 2015
I share such a good news from Spain. Proud tobe a part of!!!!on Aug 3, 2015
Sir, Great Personality with High Ambition. We salute your Confidence which made you as an Indian Technocrat. We will work SMART & HARD to Sustain & Futuristic growth for our SMG. Proud to be as an SMG family member.on Jul 31, 2015
Working for SMR UK since the take over from Visiocorp ,I have seen a growth within my department and thankful that Mr Sehgal took over the company and has taken us to the place we are now as it could have been so different for all employees without the Vision of Mr Sehgalon Jul 30, 2015
Congretulations .... It's an excellent journey of Motherson Group and proud to be a Channal Partner of Group Company Anest Iwata Motherson Pvt. Ltd. Thanks Harkesh Sharma Sintonik Equipments (P) Ltd. Greater Noidaon Jul 30, 2015
I am proud to be Ex-SMR employee.on Jul 26, 2015
After being associated with various renowned organizations e.g. Delphi, Sundram Fasteners, Minda Valeo, Goodyear etc in past 25 years of professional life, I realized that Motherson is the best place to work with. I am proud to be a part of Motherson Group...on Jul 24, 2015
I am proud to be an ex motherson sumi member...I know sehgal sir, he can do anything...on Jul 23, 2015
I knew Mr. Sehgal will break all barriers one day and become one of the globally recognised personality in automotive Industry due to his vision, approach & the capacity to grab the best business opportunities available globally.on Jul 23, 2015
Very nice companyon Jul 22, 2015
\"V.C SEHGAL- \"AN ARCHITECT & ENTERPRENEUR\"on Jul 22, 2015