Motherson Sumi upsizes NCD issue to Rs 2,130 cr on overwhelming demand

Auto component major Motherson Sumi Systems on Friday announced the successful pricing of its maiden unsecured three-year non-convertible debenture (NCD) issue.


The original issue size was Rs. 1,500 crore, which was upsized to Rs 2,130 crore (using green shoe option) owing to overwhelming investor demand. Overall 24 investors, including  23 qualified institutional buyers (QIBs), have invested in the NCDs.


The issue was the joint widest distributed debt issuance by an Indian private sector corporate in the current fiscal, the company claimed.


The proceeds from the issue will be used to pre-pay debt, which will help strengthen the balance sheet and reduce interest cost, MSSL said.


"The strong response to the NCD issue showcases the trust of investors in the abilities and growth prospects of the company," MSSL Director Vaaman Sehgal said.


The company’s stock has surged 20 per cent over the past week on expectations of revenue recovery and lower losses at its greenfield plants. While consolidated revenue in the June quarter was down 49 per cent over the year-ago levels, the company expects the sales trend to improve and reach pre-Covid levels by the December quarter. With demand improving, capacity utilisation at most of its plants is at 50-75 per cent.

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Despite revenues falling 40 per cent on a sequential basis, losses at the company’s greenfield global plants have come down. This was led by fixed cost optimisation and productivity gains.


Analysts at ICICI Securities say that greenfield plant loss has been one of the key monitorables for the Motherson stock and this has shown marked improvement.


The company will use the funds primarily to refinance its debt, said Chief Financial Officer G N Gauba.


“It’s a new set of investors. It also creates a market benchmark. It also helps in terms of future issue as we have set the benchmark. Unlike many other issuance where there one two investors this was widely distributed. It will lead to better trading. ” said Kunal Malani, head of group strategy.