Comfortable liquidity, with focus on further growing liquid assets, Motherson Sumi (MSS) issued an update on the Covid-19 situation, financial gearing/liquidity, and M&A opportunities. The company announced it was well positioned on liquidity, with an 11-quarter low debt and adequate liquidity as well as a focus on generating further cash. It expects the current crisis to introduce M&A opportunities, and key customers are already pointing it in the direction of certain troubled companies. Here are the key highlights from the press release: MSS is seeing positive development in demand from its China plants, which had initially been shut down at the onset of the pandemic but have since recovered their production levels to nearly the pre-Covid state soon after resuming operations.
For all other plants (India, the EU, and the US), MSS has received positive reopening dates for the vast majority of its plants by end-April / early May. Governments in various parts of the world have instituted employment protection schemes during the shutdown period, as per which they are bearing part of the employee cost. MSS is actively working with the governments to further reduce fixed cost during this period of non-production. The company is monetising engineering working capital by actively working with customers. It is working closely with its customers to realise receivables as well as with the supply chain for smooth continuity in operations as lockdown restrictions are lifted.
MSS’ net debt as of Mar’20 stood at an 11-quarter low of Rs 71.5 bn at a consolidated level and €702 million at Samvardhana Motherson Automotive Systems Group BV (SMRPBV). Consol cash stood at Rs 46.9 bn, with €412 m at SMRPBV. Consol drawable committed/uncommitted facilities stood at Rs 55 bn, with €458 m (committed lines) at SMRPBV. It has adequate headroom in its bond documents to utilise the above, and no major debt maturities are scheduled over the next 12 months. To further enhance liquidity in these uncertain times, the Board of Directors has accorded in-principle approval to raise debt of up to Rs 10 bn. On pledged shares: SAMIL has repaid part of its debt, and subsequently 30.5 million MSS shares (a total pledge of 254.4 m or 8.05% of equity) are expected to be released from the pledge this week. SAMIL intends to pay back more facilities from internal accruals and dividends going forward.
