Vivek Chaand Sehgal, Chairman, Motherson Sumi Systems Limited, talks about the performance of the September quarter, the slowdown in the US class 8 truck, SMRPBV and expansion plans among others during a talk with Pooja Tripathi, Zee Business. Excerpts:

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Q: Motherson Sumi's numbers on the operational front has been a good one. What led to this and what is your outlook on margins for the remaining half of FY20?

A: Actually, this is the last year of our five year plan in which every company and factory has worked on a mission mode to make sure that our return on capital employed is the best one. In fact, our board has thanked each of them. It has also encouraged and appreciated our associates and management for performing amid difficult conditions. As far as return on capital is concerned then we have focused a lot on our inventory and cost and informed the market about how capable we are and what we can do. In the next two quarters, we will try our best to keep moving towards our target of 40% gross.

Q: Did the slowdown in the class 8 truck sales in the US had any impact on your company and let us know about its performance in the September quarter?

A: I can't compare our products with someone else's product as am not aware of its impact on those companies. So, I can just talk about our own company. PKC Group that is functional in the truck segment in the US has posted revenue growth of around 12% and its profitability is even better. MWSI - our second company functional in the US - has performed well. So, we can't compare it with others as our components are completely different from others.

Q: Update us on the ramp-up plan of the new plant at your subsidiary SMRPBV?

A: Our Tuscaloosa, the American plant, is doing much better and its demand has increased from 650-700 - that we talked last time - to around 1000, which is an increase of almost 40%. The numbers can go up to 1,300-1,400 but the next quarter. This means, demand is increasing when we are securing our line, which is good news. Besides, SMRPBV's performed well and there is a 15% growth in revenues, which is good and is part of life. It is a matter of one or one and a half quarter and everything will happen in the same period. Rest all the plants are doing very well. If you have a look at the presentation, then the company's performance has been shown by taking it into account as well as without it. And, if you look at it without them then the group's performance is very good but in spite of that, they have raised their revenue as well as EBITDA.

Q: Utility Vehicle's (UV) market has substantially gone down in India and you have some exposure in the segment as well. What is your outlook on this market?

A: Motherson has a speciality in which the advantage of its 3CX15 comes in light. Demand is low in a market and high in some while flat in others but overall, we are present in every market. This is something that provides an advantage to our shareholders .i.e. no matter what the condition is in a particular country or a zone the group is doing very well. So, there are challenges in India and everyone is aware of it. So, Indian business will start doing well as soon as there is a correction in the conditions. I think it is doing well but still, we want it to do better.

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Q: Are you looking at some market expansion plans in other geographies in this fiscal year?

A: Motherson is not a company of a particular product but it has multiple products and customers in multiple geographies. And, when there are talks related to slowdown then one should be aware of a fact that the market valuations have also come down. This is something that is providing us with a chance to acquire a company and six months are left for it. Actually, we have a target of 18 billion and we are sitting at about 12 billion, thus ample opportunities are available and a lot of time is available and everything is possible.  

Q: What is your CapEx for the remaining part of FY20?

A: CapEx guidance has been provided earlier and it is less than a half at this moment. And, I don't think that we have any plan to create a new plant in the next six months. But, an acquisition may happen and CapEx will be raised if something happens on this front. I think it will be a piece of good news because we will provide growth guidance as well for the fifth year.