MOSL: MOTHERSON SUMI (Buy)-Business reorganization to segregate India business
MOTHERSON SUMI: Business reorganization to segregate India business; To acquire balance 49% stake in SMRPBV through share swap
(MSS IN, Mkt Cap USD5.9b, CMP INR134, TP INR160, 20% Upside, Buy)
- MSS has proposed the reorganization of businesses within the group with an objective of (a) addressing the long-standing request of Sumitomo (~25.34% stake in MSS) for keeping its participation focused on the India wiring harness business, and (b) consolidating/simplifying the structure for minority shareholders.
- This will lead to the acquisition of the balance 49% stake in SMRPBV (HoldCo for mirrors and plastic part business) from SAMIL (Promoter owned HoldCo of MSS) through share swap with MSS.
- The proposed structure will create two listed entities - (a) the India wiring harness business, and (b) global businesses + other India businesses. We believe that this will drive better value discovery for the global business and also give minority shareholders an option of investing in either or both the businesses.
Specifics of the group business reorganization proposal
- The Board of Directors of MSS have granted an in-principle approval for re-organization of businesses within the group, which includes
- Demerger of the India wiring harness business into a new company having mirror shareholding as MSS and shall be listed,
- Consolidation of shareholding in SMRPBV by merging ~49% stake held by Samvardhana Motherson International Ltd (SAMIL) in SMRPBV into MSS.
- Demerger of the India wiring harness business would not include the 50% JV with Kyungshin Industrial Motherson, which makes wiring harnesses for Hyundai India.
- Effectively, the current listed entity (MSS-2) will be left with the global businesses (100% of SMRPBV and PKC) and the remaining India businesses including JVs. The India wiring harness business (MSS-1) will be focused on the domestic India business, as desired by Sumitomo (Refer Exhibit 1 & 6). MSS has a sub-committee of directors to drive this and come back with a definitive proposal and scheme of reorganization within a period of 3-4 months.
Motherson Sumi Systems is engaged in the manufacturing of rearview vision systems, interior and exterior modules and wiring harness. Co.'s business portfolio comprises electrical distribution systems (wiring harnesses), automotive rearview mirrors, polymer processing and tooling, elastomer processing, metal machining, and information technolgy, engineering & design. Co. also provides manufacturing support, including compressors, paint coating equipment, auxiliary equipment for injection moulding machines and automotive manufacturing engineering services.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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