Samvardhana Motherson International (SAMIL), the auto and non-auto parts making company, part of the Motherson Group, has reduced its capital expenditure (capex) estimate by Rs 500 crore for the current year, following weak demand in Europe and the America.
From its earlier announced estimate of Rs 5,000 crore for FY25, SAMIL hopes to close the year with Rs 4,500 crore capex. Grappling with near-stagnant growth, markets across Europe, led by Germany, are cutting down their demand estimates after a cut back in automotive production.
“To a large extent Europe and the Americas to some extent are seeing both lower production levels as well as delays in starting SOP (standard operating procedure). The capacity addition in these regions have been delayed,” Kunal Malani, CFO, SAMIL, said in a post earnings call.
Europe’s light vehicle sales were down by 10%, while its commercial vehicle sales were down by 25%. North America light vehicle volumes was down by 3% and its commercial vehicle volumes were lower by 16%, according to S&P Global Mobility.
During the three preceding quarters of FY25, SAMIL clocked a capex of Rs 2,915 crore, which was down 12% year-on-year. However, at Rs 4,500 crore, the current year’s capex will be 12% higher, compared to last year.
For the December quarter, SAMIL recorded a 55% y-o-y growth in consolidated net profit, at Rs 984 crore. This came on the back of a 6% y-o-y growth in revenue during the same quarter, at Rs 27,232 crore.
“The stock has corrected over the last few months, given an uncertain macro demand in its key regions. However, strong Q3 performance demonstrates SAMIL’s business resilience and should allay investor concerns,” a Motilal Oswal Financial Services report said.
The company has 14 plants, including eight in India and three in China, are in various stages of completion. Of these, six new greenfield projects are expected to come on stream in the next two quarters. SAMIL is engaged in wiring harness, vision systems, modules and polymer products and integrated assemblies.
It has also invested in emerging businesses like elastomers, lighting & electronics, precision metals and modules, aerospace, health and medical and logistics services.
The modules and polymer products is a higher revenue generating division for the company, generating more than half of its operating revenues, followed by the wiring harness division.
Speaking on the Russia-Ukraine war, SAMIL’s senior management said that the company is not directly impacted by it since it does not have any manufacturing plant in Ukraine. It, however, has two plants in Russia, which cannot produce due to sanctions.
Laksh Vaaman Sehgal, director, SAMIL said, “We have a very diversified business model. So not any one country is able to really affect Motherson’s business. Thanks to the diversification that we have been able to pull off with the businesses.”
