Motherson Sumi Systems to raise up to ₹1,000 crore to secure liquidity3 min read . Updated: 14 Apr 2020, 07:03 PM IST
The company said it has been rationalizing costs, controlling non-critical business investments and optimising working capital to conserve cash flows across its global footprints
Mumbai: Motherson Sumi Systems Ltd (MSSL), a leading auto components supplier, said that its board of directors has given an approval to raise up to ₹1,000 crore to secure liquidity while dealing with the global coronavirus pandemic.
The company said that its board has delegated the responsibility to the committee of directors who would evaluate various borrowing proposals to raise the required funding.
“To further enhance liquidity in these uncertain times, the board of directors has accorded in-principle approval to raise up to ₹10 billion and delegated its committee of directors to evaluate and decide on various borrowing proposals. We are also proactively working to leverage on various government support schemes to enhance liquidity," MSSL said in an official statement released late night Monday.
The company reported its unaudited financials wherein it’s consolidated net debt level as on March 31, 2020 stood at ₹7,150 crore. It included Samvardhana Motherson Automotive Systems Group B.V. or SMRP’s, in which MSSL holds 51% stake, net debt of euros 702 million.
MSSL said that it’s consolidated cash as on March 31, 2020 stood at ₹4,690 crore, out of which SMRP reported cash reserves of euros 412 million for the period.
“We have adequate headroom in our bond documents to utilize the above and there are also no major maturities of debt in the next 12 months," the company said in a statement.
The company said it has been rationalizing costs, controlling non-critical business investments and optimising working capital to conserve cash flows across its global footprints.
As part of reducing its fixed costs, it said that it is working with the governments, which have instituted employment protection schemes and are bearing part of employee costs during the lockdown period. It also added that it has already completed its major capex investments in the last fiscal and that any new future capex requirements would be aligned with the new product launch schedules of its customers.
The company has lately seen its plants open in China and South Korea. While MSSL’s plants across India, Europe and America are temporarily closed, it said that it has received reopening dates for vast majority of the plants by end April or early-May.
“Multiple internal task forces have been created to monitor the situation on a daily basis across all our plants," it said.
Vivek Chaand Sehgal, chairman, MSSL, said the unprecedented covid-19 crisis has hindered the management’s plan of closing its target acquisitions.
“However, we believe that these same opportunities have become more attractive in valuations since the covid crisis," he said adding that the customers have asked to look at companies that can be acquired at low valuations.
“We wanted to showcase our plans to the investors in June but keeping in mind the current environment, we will probably do so in October," he added.
The company also updated that Samvardhana Motherson International Ltd or SAMIL, which owns 33.43% in MSSL, has paid part of latter’s debt and subsequently 30.5 million MSSL shares are expected to be released from pledge this week.
“It intends to pay back more facilities from internal accruals and dividends going forward," it said.
Meanwhile, driven by the estimated impact the pandemic will have on the earnings and cash flow of SMRP in FY2021, Fitch Ratings has downgraded the company’s long-term issuer default rating (IDR) to BB from BB+ with negative outlook.
“The negative outlook reflects the risk of further deterioration in SMRP's credit profile if covid-19 spread is not controlled or is prolonged, leading to a more pronounced and extended impact on economic growth and new auto sales globally," Fitch said on Tuesday.
MSSL had reported significant exposure and dependency on its European operations, where Europe and Volkswagen Group contributed more than 40% and 28% of consolidated revenues in FY2019, respectively.
The company’s consolidated sales in FY2019 stood at ₹62,570 crore, which included ₹55,100 crore from overseas businesses and ₹7,400 crore from domestic operations.
It’s net debt has seen a significant rise over the past years, increasing from ₹3,200 crore in FY15 to close to ₹8,000 crore in FY19. The company has set up more than 30 new manufacturing plants globally including India in the last five years thereby adding enormous fixed costs.