September 30, 2020

Motherson Sumi: Billionaire car-part provider Vivek Chaand Sehgal is setting a frightening aim for Motherson Sumi

By Anurag Kotoky

Vivek Chaand Sehgal has a monitor file of reaching the seemingly unattainable. His firm, a sprawling elements provider to the world’s greatest carmakers, has exceeded its five-year goal each time bar one previously quarter century.

His newest aim is equally daunting — Motherson Sumi Techniques Ltd. is concentrating on to triple annual gross sales to $36 billion by 2025. Sehgal, 63, plans to attain that by doing what he does finest: dealing. Or extra particularly, in gentle of the coronavirus pandemic, shopping for up distressed corporations as they run out of cash.

For Sehgal to attain that, nevertheless, issues must enhance dramatically. 5 years in the past, Motherson set a goal of consolidated web gross sales of $18 billion by 2020, and it managed lower than $12 billion because the virus hit and India noticed its worst-ever slowdown in vehicle gross sales. The inventory has crashed nearly 60% in the course of the interval, earlier than doubling to this point this monetary yr.

Sehgal admits there’s “a number of ache within the system.” However he believes the corporate’s give attention to fixing issues with its clients, teamed with an eye fixed for offers, will “give us a number of alternatives within the coming months.” “Someplace round October, November, you’ll begin to see and listen to that we’re going forward and taking up corporations,” he stated in an interview with Bloomberg Information.

It’s an method that’s change into an indicator of Sehgal’s Samvardhana Motherson Group, which he based together with his mom — therefore the identify — in 1975. A three way partnership in 1986 with Japan’s Sumitomo Wiring Techniques Ltd. to provide to India’s first regionally manufactured automotive, amongst others, set the small buying and selling home on the highway to a lot larger issues. Since 2007, Motherson Sumi has accomplished greater than a dozen M&A transactions globally, typically shopping for corporations twice its dimension. It now sells all the things from inside trims to wiring harnesses, bumper bars, door panels and lighting.

Carmaking Elite

A primary instance of Sehgal’s eye for reasonable belongings is the 2009 acquisition of U.Okay. group Visiocorp Plc. With the worldwide economic system in tatters after the collapse of Lehman Brothers Holdings Inc., a German buyer approached Motherson to avoid wasting the corporate. After a lot deliberation, it purchased Visiocorp — twice its dimension with 660 million euros ($782 million) in gross sales — for simply 26.5 million euros, changing into the world’s largest maker of rearview mirrors in a single day.

As a lot as 80% of Motherson’s focused consolidated income over the subsequent 5 years will come by way of acquisitions, in addition to entry into new segments like medical gadgets, aerospace, safety methods and logistics, Sehgal stated. Small- to medium-sized corporations will run out of money earlier than larger corporations, offering Motherson with new targets, he stated.

Motherson doesn’t have any pre-determined dimension or geography in terms of M&A. Relatively it maintains a give attention to serving to clients maintain their manufacturing strains working. The collapse of even a small provider can halt output, Sehgal stated. “The answer doesn’t search for a dimension. Resolution means if it’s a 10-million-euro firm, I’ll nonetheless take it over if it’s stopping the road of my buyer, and even when it’s a $10 billion firm, I’ll take it over.”

The group’s clients are a who’s who of carmaking elite, together with Basic Motors Co., Jaguar Land Rover, BMW AG, Daimler AG and Volkswagen AG. Primarily based on the family’s 36% curiosity in Motherson Sumi, the publicly listed entity, Sehgal is price round $2 billion, in response to the Bloomberg Billionaires Index. Sehgal declined to remark.

Billionaire Increase

His precise web price together with different belongings is nearly positively larger, and will change into clearer as quickly as July subsequent yr after a bunch restructuring. That course of will spin off Motherson Sumi’s native wiring harness enterprise into a brand new wholly owned firm, and the unlisted belongings of Samvardhana Motherson shall be tipped into the unique agency. Each entities shall be individually listed, which analysts say will assist in discovering the companies’ worth, permitting them to be higher benchmarked towards world friends.

Whereas something associated to electrical automobiles is having its time within the inventory market solar, Sehgal is much less constructive. Not like most carmakers and governments which might be speaking up trendy applied sciences and cleaner, automated vehicles, he says insufficient infrastructure and geopolitical tensions will imply inside combustion engines stay related for many years.

“For the subsequent 20 years, automotive will stay just about the identical,” Sehgal stated. Carmakers “are asking me to get into all the things else, however they’re not asking me to get into electrical automobiles.”

In speaking concerning the future, Sehgal ceaselessly brings up his age — “I’m 63 plus,” he retains saying — inevitably prompting questions on succession. Like most Indian family-owned companies, Sehgal’s son, Laksh Vaaman, who’s now vice chairman, is ready to take over.

“I’ll retire once I go on 4 shoulders,” Sehgal stated, referring to an Indian customized of carrying the deceased on their technique to cremation. “My job is to show all the things that I can to my son. The following five-year plan is my handing over to him. So someplace round 68, I’ll begin spending time with my grandchildren, I’ve 4 of them.”

It’s a deserving future for Sehgal, who began out incomes one rupee for each kilogram of silver he transported for his grandfather 45 years in the past. The family on his mom’s aspect have been jewellers, and within the film enterprise on his father’s. Motherson Sumi listed in Mumbai in 1993. Those that have stayed the course have seen their funding develop 32% yearly on a complete returns foundation. That’s 3 times greater than the typical yearly achieve within the benchmark S&P BSE Sensex Index over the interval.

Sehgal credit a number of the success to his entrepreneurial mom.

“I wasn’t superb in research, so my mom was very frightened about me. So she stated let’s get into enterprise. From there, we by no means regarded again actually,” Sehgal stated. “It’s an unblemished file, so very grateful to the large boss up there.”

— With help from Ravil Shirodkar.