Motherson Sumi rejigs biz to simplify structure

Share price of the auto-component maker Motherson Sumi System (MSSL) fell 6% in early trade today suggests investors seems to have received unfair deal, which aims to create strong business platforms under the Motherson umbrella and enhance stakeholder value for the long term.
On Thursday, the company board approved the demerger of its Domestic Wiring Harness (DWH) business from MSSL into a new company. The plan is to bring all group businesses into listed entities.
The board in its meeting held on July 2 approved demerger of DWH business of the company into new company, which will eventually be listed, with mirror shareholding as that of the company.
The company will allot 1 share of new company for every 1 share held in MSSL.

The board also approved the merger of Samvardhana Motherson International (SAMIL) the principal holding company of Motherson Group and promoter of MSSL, into MSSL.
The company will allot 51 shares of MSSL (of face value Re 1 each) for every 10 shares held in SAMIL (of face value Rs 10 each) and MSSL will be renamed as Samvardhana Motherson International.
MSSL’s business realignment plan is medium-term positive but crossholdings remain, however, the minority shareholders would continue to own 38% In DWH. Meanwhile, minority shareholders’ holding in Motherson Sumi (ex-DWH) would fall to 27%.

MSSL reported consolidated net sales of Rs 14870.32 crore for the quarter ended 31-Mar-2020, down 3.67% from previous quarter’s Rs 15436.46 crore and down 12.12% from the year-ago quarter’s Rs 16921.4 crore. Net profit for latest quarter stood at Rs 183.38 crore, down 55.27% from the corresponding quarter last year.
As of 31-Mar-2020, DIIs held 11.21% stake in the company, while foreign institutional investors held 15.5% and the promoters 33.96%. Total market cap stands at Rs 31168.81 crore.
Overall deal contours positive for retail and institutional share holders
As pef the desl demerger of domestic wiring harness biz from motherson sumi into separate co

The demerged entity will eventually be listed. Demerged entity will be largest listed automotive wiring harness player in india
For every 1 share held in motherson sumi , 1 share of new demerged entity would be allotted
The big positive is that merger of promoter holding co samvardhan motherson into motherson sumi systems ltd
Merger will be EPS accretive in first year of merger , i.e fy22. Also merger of SAMIL ( samvardhan motherson) into MSSL will create strong listed entity having diversified product portfolio and eill help MSSL position as a leading globally diversified component supplier and will also simplify group structure
Going aheaf all auto related businesses will now be under listed entities

It will create a separate entity for domestic wiring harness biz which will be listed later. Motherson sumi shareholders to benefit through 100% stake in SMRP
To bring all auto component and allied businesses under motherson sumi systems ltd and offers greater operational and financial flexibility to pursue organic and inorganic acquisitions.

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