Motherson’s deal with Daimler to be EPS accretive right from the beginning: Vivek Chaand Sehgal

“The domestic story is well illustrated by every effect that is happening,” says Vivek Chand Segal, president and co-founder of Samvardhana Motherson.

Let's talk about the acquisition of Daimler India Commercial Vehicles' (DICV) frame manufacturing and assembly operations facilities in Chennai. What has been the acquisition cost?

This is all within our internal accounts receivable and is close to Rs 1,000 crore.

What about your perspective in terms of the acquisition, in terms of the valuations that were made and what exactly is the EBITDA of this plant?

It is too early to comment on this, but the contract will be for approximately 10 years and we will take over the manufacturing and assembly of the complete tires for Daimler Trucks in India.

Just to clarify, you said that the acquisition will be funded by internal accruals. Any color on the valuations itself?

Yes, through internal accruals.

What cumulative value do you think this deal is likely to have in terms of revenue? We understand that the income profile is around Rs 300 crore. How do you expect it to expand in the future?

Well, the trucks are poised for growth and we feel that from a contract manufacturer, we have become an assembly manufacturer of Daimler trucks and that will be very incremental value. It aligns with our core philosophy of providing a solution to car and truck manufacturers.

So you are saying that the acquisition cost is around Rs 100 million. Are we right?

The purchase price is something around Rs 1,000 million.

Since you're already trading with them, could you give us an idea of what the margins look like and what room for optimization there is?

When you go from contract manufacturing to full assembly manufacturer, the added value is higher. Also, this thing was bought and sold one by one. So it's definitely better than contact manufacturing.

What could the current margins be and what is the room for improvement in the next two years?

We do not draw margins. We always target ROCE and it's very cumulative, and it will be cumulative for EPS and everything we're doing right now, much better.

It has a third manufacturing plant in Serbia. What is your sales outlook, especially from this region?

We have set up a factory. This is SAMIL's 98th wire harness factory. It was opened by the President of Serbia, His Excellency Mr. Aleksandar Vucic. This plant was created, mainly only for Daimler trucks at the moment. We hope to start supplying in the next two or three months.

How are you managing the energy crisis in Europe? Is there any situation of factory closure?

No factory is closed. I think it is very clear that the deal was made with the European Union. Countries are making efforts and customers understand the nature of the crisis and how to resolve it.

What is the outlook for local business growth prospects and which sectors do you think will drive growth?

The local history is very well illustrated by each effect that takes place. We believe that the market is very strong, the demand is very strong and the customers have what it takes to meet the expectations that India has.

Will the new acquisition going to be EPS accretive right from the beginning?

Yes, I can confirm that they will be cumulative EPS from the beginning.

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