Last time when we met the world was in a flux. The numbers of cases in Europe and the US were rising. This time the situation is reversed; things are getting bad to worse in India while the situation is better in developed nations. How will that impact your business?
One thing is sure. Times are uncertain everywhere in the world. Whatever looks good and sustainable in any particular country, suddenly gets disturbed. India looked very positive the last time we talked and at this moment, we are in the midst of this Covid storm. Fewer people are coming to work because they want to stay at home and be safe. That is presenting another challenge to some of our plants in India. Globally, the governments have been very clear in their thinking that industry should not come to a halt because it creates even more problems for them in the short term and the medium term. So, while there are lockdowns in cinema halls and malls, industry and schools are being kept open. Governments are ensuring that kids can go to school and the people can go to work and life somehow must continue even in these challenging times.
Though the car market had been badly hit in the Covid first wave, Do you think the passenger car market has stabilised the way we approach mobility? Has that changed permanently now?
In my personal opinion it is going to overcome all the challenges because of the simple fact that the whole thought process of personal mobility has changed. While people were very comfortable with sharing rides and all these things can happen today, it is really a concern. You can see it happening with the people buying even second-hand cars so that they have some form of personal mobility. This is a global phenomena. It is happening everywhere and India is no exception. So, Covid second wave or God forbid if there is a third wave or whatever, that only reassures people that the thought process they have is sustainable.
The dispatch numbers which we get from luxury car makers especially for Europe and the JLR numbers for China — all indicate that a double digit growth for this year is almost a given. Do you see a high probability of double digit growth in the auto market across the board?
We are seeing the same thing over there and even in the interim context in today’s day and age, barring the shortages whichever are there people have been using their work from home very well. They still want to work and hence the consumption of home appliances, electrical gadgets, TVs, computers etc have really gone through. People are upgrading to better products. They can work more effectively and that also leads to the shortages in semiconductors and other raw materials.
You can also see that increasing but I do not see that reducing in the next six months to a year. Somewhere around 2022 Q1 and Q2, we will start getting some respite because capacity takes time to build.
You are in a quiet period right now. Do you expect this year to be marginally better for you?
Other than on the human front, a year has to be better under the circumstances as we extrapolate the first quarter of last year. It is going to be a better year but for the human tragedy which is appalling.
A couple of years ago, when the world discovered that EV was going to be the next destructive technology, everyone had written off Motherson. But your EV order book has grown exponentially. Is the EV business a high delta and the high margin business?
Definitely. In these times, a lot of things are at place and are pretty dynamic in nature. People want to go towards a full electric engine scenario and our order book is also growing. When we announce our results, we will give a new order book and I am sure they are showing what you are reading in the papers. People want to go for electric vehicles and that throws a challenge to us but also it shows off our technical competence. EVs require all other parts to be lighter and stronger . Motherson is in a very sweet spot over there because we have all the technologies from all the companies that we took over in Germany and in France and other places. We are very relevant and car makers absolutely like what we are delivering to them.
I have admired the ability of Motherson to understand the need of the customer, create a capacity near the demand centre and then buy an asset and turn it around. You know the art of growing inorganically. 95% of your acquisitions do not fail. How do you manage this?
Why change something which is good? At this moment, there is a tremendous amount of uncertainty in the automotive world. They want to look at companies which have a long-term view. Wwe have never sold a company in our life. We take a company over, sustain it and make it dependable with better quality and then deliver the products to our customers. I do not think we will move out of that particular area. Our thinking is very consistent with what we have done in the last 25 years. We have already finished five-year plans. This time we also have some new verticals which would be very interesting. We are in a very exciting era at the moment.
As per the vision statement you have shared that you have ambition to keep a return ratio of nearly 40%. How do you see the non-auto versus auto business ratios moving? Also, how do you arrive at that 40%?
We hope the whole thing will kick in the next four years. In many of the new verticals, we are on the verge of making the announcements and the target is pretty decent at $9 billion by 2025. We are telling the world we are open to take over companies, solve the problems and also deliver to the people what they really need in these trying times. We are getting into making medical devices. They will deliver a tremendous amount of value to the consumers but at a much cheaper cost.
What will be the basic character of your medical business? Will it be a B2B or a B2C business? Will it be a fully independent business?
Both forms should be there. We are talking to OEMs also and we would be making devices for them and we would also be coming out with our own brand. It would take a little longer to launch it but eventually that is where we want to be. The good thing is that we have over 272 facilities and each one of them has huge core strengths in product design, mould design, assembly and then marketing of the particular product. The whole group builds up on this. It is a very exciting sphere where we are going and would love to share with you. We have shared it at the virtual investor conference we had about three months ago but would love to share with you at an appropriate time.
There is a huge uptick in commodity prices. This will directly impact your revenue as well as your operating margins. Steel prices are at an all-time high; suddenly copper is being called the new oil or the new gold. How are you managing the huge uptick in commodity prices?
We are very grateful to our customers. They understand what is happening, they are dealing with it themselves. They have been very supportive to all their suppliers. These days, even if you lose one car, it is a huge loss. We are working very closely with the car markers and all the automotive customers in the world. We have not seen any hesitancy from their side to not to take care of this particular issue.
“Last year at this time our share prices was around Rs 48 and now it is about Rs 210. What we are doing is very clearly understood by investors and that is reflecting in the share price as well.”
We are united in a very wonderful way where everything is very transparent and things are happening very fast. Now we should focus on production. More and more goods and services are being produced as when they are required and I am very grateful to our customers for supporting this particular initiative. Otherwise we could have been in serious trouble.
In India the entire focus is on being Atmanirbhar and push towards creating local manufacturing capacities which have been given a booster with the PLI scheme. How do you see this narrative changing for the world because everybody wants manufacturing to shift to their respective country and reduce dependence on imports?
I do not think it is anti-globalisation. What you can effectively produce in any country you will. You can have nationalistic feelings and decide you want to do it in India, China or Japan. But eventually business and all these things must make economic sense and I personally am very thrilled about the PLI scheme and all the things that are happening in India or in any other country. We take pride that we contribute to that country but I think India is the only country where we are saying
vasudhaiva kutumbakam which means the world is one family. That is a very wise way to do it. Eventually it will come down to wherever we can effectively produce, we will. We are looking at a lot of PLI schemes in India also but eventually it is a matter of economics.
One of the very basic indicators we have used in the past was to judge the business trajectory from Motherson by looking at commentary from passenger car companies, global luxury car companies. But given that you are getting into a new medical business, the EV business, what are the indicators we should now track to understand the course of business trajectory?
It is going to be a bit of a challenge. But one thing is very clear that Motherson is a very transparent company. We have never hidden any fact from anybody. We are now getting into the reorganisation where Motherson will have two distinct things – one would be domestic Indian play very sharply focussed on Indian growth and all that’; the other would be a more global play. In that also, our last two quarters’ results have clearly shown how our different companies will fare. The same would be also there for the new vertical. We would show it very clearly to our people so that they can understand this company. And the proof of the pudding is in eating. Last year at this time our share prices was around Rs 48 and now it is about Rs 210. What we are doing is very clearly understood by investors and that is reflecting in the share price as well.
What would you say is your Covid learning? How have you managed to turn the company around?
I am very grateful to my team for that. Globally, we are about 1,50,000 people and these 1,50,000 people have got together and ensured that we delivered. I am very grateful to every single unit, even if a unit for some reason was in a loss kind of situation. The way they worked to bring the loss down to zero was a big thing and amazing from Motherson. The name rubs off on the team. It is all about trust. One thing we have learnt from one of our gurus is that do not waste time when people are working. If suddenly there is no work, use the people to solve all your issues. We had huge issues in multiple plants in different countries. Our team members across the globe, in the time of Covid, actually went to the plant and sorted out the issues one by one. In the US, where we used to face
shortage of people, during Covid found a lot more people available suddenly. We actually hired more people, brought them in, put them in the right places and they were very grateful for that. It was the same in Europe, India and everywhere.
So to waste a crisis is a huge mistake! Crisis will always happen, just use it to your advantage. That is the way to go.
You have managed to grow and add value by acquiring companies, adding to the customer base by turning around some of the inefficient plants. Globally, 50% of the acquisitions do not work, how have you managed to get this great success ratio going for you?
We had a particular lesson in 1947. We are so diverse in India and we never use that to our advantage. But now we are in 41 countries. The ability to recognise the fact that the only culture which is valid and works very well if you focus on it is agriculture. Other than that, all cultural issues should be out of the window. Just focus on production, focus on customer satisfaction and the things which are necessary for your ultimate customer.
Motherson has learned its lesson very well on that and that is why we are very strong, we do not hesitate at all; we are absolutely fearless. We are willing to go to any country or any place you want us to go. We have learnt from India that diversity is actually strength.
Let us look at Hero MotoCop. Mr Munjal decided to shut down the plants. It could be a pre-emptive move, but do you see a similar kind of a phenomenon which other companies could also adopt?
I personally think that nobody can predict on this matter. I know Pawan ji as a person. He is an amazing person and he must have thought about what are the reasons why he is doing that. It must be because of certain circumstances in a particular country, a particular city and that particular area where their plant is. So these things are going to happen. It is not going to be a hunky-dory ride from now to the next one year or so.
Vaccination is a very important thing. More and more people are going to get vaccinated and they are going to get over the fear of these particular new circumstances that we have. It is going to become better eventually but in the short term there will be a lot of hiccups. But you have to be very nimble on your feet and you have to be very focussed on what your customer wants and breathe with the market. That is a big lesson. Motherson always breathes with the market. If the market is saying run, we will run, if it says walk, we will walk; if it says sit down take a chai, we will do that. So just breathing with the market is the ultimate mantra I think.
What are markets telling you walk, run, sit down?
We are in different markets and so there are multiple legs. Many of them are almost in the running stage but some are walking and some unfortunately are sitting down and having a cup of tea, that is okay.
