We don't do acquisitions to become number one, says Motherson Sumi chairman

 

V C Sehgal

V C Sehgal

 

  The country’s biggest automobile component maker Motherson Sumi has grown through acquisitions to nearly Rs 45,000 crore in revenue. Last month, it announced the acquisition of Finnish wiring harness company PKC for Rs 4,150 crore, its biggest till date. V C Sehgal, chairman, Motherson Sumi, spoke to Ajay Modi on the acquisition, the business targets and opportunities. Edited excerpts:

 

How is PKC different from the rest of your acquisitions?

Every acquisition is unique. People generalise when they talk about acquisitions. PKC is very interesting for us because it is in wiring harness, which is our backyard. Whatever we have learnt is a result of wiring harness. PKC is a profit-making company. Once we take it over, we will be able to explain how it will add value.

Most of your previous acquisitions were of distressed assets. PKC is profitable. What is the scope to make improvements?

Acquisition does not always happen due to profitability or bad performance. There could be a strategic importance. It’s not always about money. PKC is very strong in the US and Europe. What about Japan, China, India or South Korea?

What segments would you want to grow further?

We have maintained our vision of being a globally preferred solutions provider. The customer tells us where to go. We do not strategise.

What are your customers telling you?

Thirty years ago, less than 20% of the car was made outside the manufacturers’ premises. Most stuff was in-house. Volumes were small. Today, 80% of a car is made outside. The numbers are huge. In such a situation, things go wrong and hence you need a solution. That’s where Motherson has a huge expertise. Sometimes, companies are taken over because the owners do not wish to run them anymore. Car makers need long-term solutions, which we want to offer.

You have set a target of $18 billion in revenue by 2020. What do you need to do to get there?

The target is very clear. We are aiming for $18 billion, but at 40% ROCE. I will have no shame if after 2020 I come back to you and say that I could do only $14 billion but have the ROCE. We never do an acquisition just for the topline.

Overseas acquisitions by other component makers have not always succeeded. How you do things differently?

I can’t comment on what people have done. They must have had valid reasons. We will not do an acquisition to become number one in a business.

Does the Indian component industry need more Mothersons?

You think I need more competition? What is good must be replicated. If you think, Motherson is good, we hope it is replicated.

You have the tag of being the country’s biggest component maker. Does it help when you go out?

How big you are doesn’t matter. What matters is how brilliant you are in delivery. You could make a great product but may not be able to deliver it. Delivery, cost and quality are the parameters. Since we don’t supply to the open market, size does not matter. Car makers are worried about design capabilities, cost, quality, delivery, safety and recalls. We satisfy customers' expectations on these.