It’s a really interesting one. We believe that Ichikoh is a very great company in Japan. We just took over by a collaborative value, and they’re into lighting. And this one is lighting as well as mirrors, among other things. So we deliberated, and they kept the lighting portion, and we bought the mirror business.
We have manufacturing plants in Japan, but this is the first acquisition in Japan, so it’s very special. It’s profitable from day one and that’s a good part of this acquisition. Though this is a small acquisition, it gives us an important foothold in Japan. And with this, we will become more comfortable with the Japanese laws, people, and policy. It is from the Japanese that we have learned almost everything. Now, they will be part of our team in a more comprehensive manner. So it’s very interesting.
The first acquisition in Japan and profitable business from day one~
Q. This acquisition comes soon after the reports that you were in a race to acquire Marelli which would have helped you achieve your revenue target. That did not work out as your partner KKR went for an independent bid, and they acquired the company, how do you see this?
It is important to set a target for our people. If it happens it is good for us. If it doesn’t happen, it’s very good for us. So we don’t force our views on anybody. We both decided that we’d go together and it didn’t happen. But they preferred to go alone. There is no friction, we are happy for them. And the possibility is always open in the future.
But we are inundated with requests for takeovers. And within the next three months, you will hear a lot of companies happening~
Q. How soon can we know about the alternative acquisition that may happen in the near future?
Many things are happening. And you know, people are very intelligent now. So if I give you even a small hint, it becomes kind of an explosive thing. And then most companies are publicly listed. So we have to be careful.
But we are inundated with requests for takeovers. And within the next three months, you will hear a lot of companies happening. We’ve been following the Ichikoh acquisition for two and a half years, keeping it quiet, keeping the lid on it. And then finally, when we both came to an agreement, we shook hands, and it started. So I think in this world, which is so informative, every piece of information is available at your fingertips. But definitely, there are a lot of acquisitions round the corner.
Q. I respect the sensitivity of the information. Do I read it correctly with these acquisitions you will be able to achieve the target of USD36 billion.
See, this sort of thing just happens organically. We just took over a company in Chennai. It was a part of Daimler Bharat Benz. We took over that as the loan waiver portion of their business. We were already doing that business. Now we have acquired the company, we own the assets and everything. Small acquisitions are happening very quickly because we cannot send huge teams to companies to look into their work. The deals were also on hold because there was a lot of blockade in different countries due to Covid.
I think it is very evident that people are traveling more now. And the speed with which the countries are opening up, I think it’s going to allow the big deals also now to happen organically.
Definitely there’s a lot of growth in markets like India and North America. There are some weaknesses in Europe because of the war, and in China, because of the Corona virus again. I think these two markets will be opening up very soon. They have sorted out their issues. And once they do this, the game is for us to take.
Motherson Group to invest about USD 400 million in Saudi~
Q. There’s a huge overcast of the energy crisis in Europe; do you see any immediate solution?
Through your channel I would like to explain that when we had the Corona virus problem two and a half years ago, we got tremendous help from the European governments in the EU and outside the EU, and from the American governments. I’m sure that in spite of the energy crisis and such other issues, the government’s over there are in sync with the industry, They are aware of what is happening. And I’m sure there will be things in the matter which will be given to the industry as relief because of this problem.
I think they are very responsible, even before we could ask, we got the money into our account. To safeguard their jobs is very important for them. So I rest assured. They might be lacking here and there. But believe me, they are very responsible governments.
Motherson Group will get USD 9 billion from non-automotive business~
Q. I see Motherson’s stock prices taking a beating. What are your thoughts on that?
They can beat it down whatever. But you know, Khushboo to finally aayegi na (the aroma will eventually come out). You can’t control the goodness of Motherson, it will come out, people will realize it definitely.
Indian plants will be mother plants for Saudi Operations~
Q. You are also looking at some of the expansion into a new market, like Saudi, etc, Can you tell us more about it?
Yeah, that’s very interesting. We were getting orders from car companies in Saudi Arabia. They want us to manufacture in Saudi Arabia. We went there and we had a meeting with the government. We were very impressed by the action and the kind of seriousness with which they were going.
The car companies have already given us the order. So we’ve got that. But I think there is an ecosystem, which is missing in Saudi Arabia. The government of Saudi Arabia also wants the Saudi people to get trained and come to this new activity.
And we find that very exciting. Motherson will work together with the government to make sure that we can create an ecosystem for the manufacturing of cars. That would be in all the areas in which we are specializing, in plastics, metals, wiring harnesses, etc. I think it’s a great shot for Motherson to go to a virgin country.
After one more quarter chip crisis will be completely behind us~
Q. What kind of investment are you looking at in Saudi Arabia? And also, are you going to leverage your presence in the UAE?
UAE definitely will help even otherwise. Motherson always has a mother country. Saudi Arabia is very close to India. So the Indian plants will be the mother plants. But all the technology required for them to manufacture these cars will be transferred by us, and also from Europe, if need be.
In UAE we already have about 2500 people. That makes it very easy for us to support Saudi without increasing our costs in a big way.
Setting up industry in the tool room design centres, manufacturing and assembly centres requires a lot of investment. So we’re talking about investing between USD 300 million and USD 400 million. But the Saudi government itself will participate in this. So it’s a very cohesive way of approaching this project.
The other exciting thing is that it will happen in KAEC (King Abdullah Economic City) which is on the Mount of the Suez Canal. It also augurs very well, because the companies here can export to Europe, ships can be there in seven or eight days. So, we are really excited over this. In the next five-year plan that we will have, you will see Saudi as a centre, and UAE also because we are working very hard there.
Q. Talking beyond automotive, how is your efforts in diversifying into health care, defence, and aerospace going on? Give us some guidance.
In the five-year target of USD 36 billion, we expect USD 26 billion to come from automotive and USD 9 billion from new avenues, which are primarily as you said aerospace and defence. We are talking also about medical devices, software and services and logistics. While every division is moving on its own trajectory, we are very excited about the medical devices.
We believe that all the skill sets that we have in our group, right from designing to product to complete assembly, are very attractive to the aerospace industry as the capabilities are very similar.
And most importantly, we are in 41 countries. We have manufacturing plants everywhere. If you put the single branches together, you will see it’s a very worthwhile extension of our divisions that we are doing.
I think the target is very clear. From these sectors we have to have USD 9 billion by 2025. But I wouldn’t want to take the thunder away from our people. In December, we are going to have the big presentations of our five-year plan by the entire divisions. So I wouldn’t want to steal the thunder from them.
There may be some glut in the electronics market as huge capacity has been created~
Q. So, just want to understand the transition that is happening in the mobility space, a new form of mobility. How do you see this?
I think as main suppliers in this market, we refrain from getting into the long term by 2030 or 2040, I tell my team that you should be focused on five years. It is for five years that people will actually place their orders and put their bets.
As suppliers, we have to do exactly what the customer wants. So we don’t worry about it too much. It is going to be electric, hydrogen, or going to be the left, right, centre. Whatever order comes to us, we will give that.
Q. Chip shortage has kept the industry in trouble for over two years, do you think we are out of the woods now?
I’ve always said that by the September quarter-end, you should see this particular thing come to some kind of solution. I think 80%-90% of the crisis is over. There are still some challenges, some delays, and some things are happening. But I think maybe one more quarter then we should be in a better position. But really the kind of capacity for electronics is very huge. One really doesn’t know when it will be finding to be in excess. But one thing is for sure whenever that happens, you will see a sudden glut because so much capacity has been put into it. I’m sure they must be having their thoughts about that.
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Inaugurated by V C Sehgal, Chairman, Motherson, the new facility is a part of Motherson’s Modules and Polymer Products division and will produce interior modules and components like instrument panels and door panels for passenger vehicles and light commercial vehicles. It replaces Motherson’s existing Tétouan site which was established in 2010, the company said in a media release.
The transaction includes Ichikoh’s mirror business (development and manufacturing of automotive mirrors and associated products) in Japan and China, catering largely to Japanese OEMs.
