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Motherson Sumi plant
Motherson Sumi plant

Motherson Sumi shares slump after S&P downgrades outlook on subsidiary

  • Board has approved consolidating complete shareholding in Samvardhana Motherson Automotive Systems
  • The proposed reorganization, once implemented, would enable the companies to pursue focused areas of growth

MUMBAI: Shares of Motherson Sumi Systems Ltd (MSSL) fell 6.7% to 101.80 after ratings agency Standard & Poor's (S&P) revised its outlook to negative for the company's material subsidiary - Samvardhana Motherson Automotive Systems Group B.V.

At 11 am, the stock was down 5.1% at 103.5, while the benchmark Sensex fell 2.9% to 38609.45 points.

In an filing to the exchanges, after market hours on Thursday, Motherson Sumi Systems announced that S&P has re-affirmed long term credit at BB+ and revised outlook to ‘negative' for Samvardhana Motherson Automotive Systems Group B.V - a subsidiary of Motherson Sumi Systems.

Last month, the company had said its board has approved the proposal to consolidate complete shareholding in Samvardhana Motherson Automotive Systems Group B.V. Motherson Sumi and SAMIL hold 51% and 49% stake respectively in SMRP.

Under the new proposal, SAMIL’s 49% stake in SMRP would be merged into MSSL, subject to SAMIL’s board and the shareholders’ approval.

“This will enable shareholders of the company to participate in 100% of value of SMRP. This will meet the expectations of the public shareholders for MSSL to consolidate and simplify the structure," MSSL said in the statement.

The proposed reorganization, once implemented, would enable both the companies to pursue focused areas of growth.

MSSL’s board has constituted a subcommittee of directors who would oversee the process of reorganization and report within 90-120 days.

Moody’s Investor Service, in November 2019, had revised its outlook for MSSL Baa3 issuer rating to negative from stable. The rationale behind the downgrade was weak performance of its greenfield operations and slowing global auto sales.

MSSL had reported significant exposure and dependency of its European operations. Europe and Volkswagen Group contributed more than 40% and 28% of consolidated revenues in FY2019.

Motherson Sumi Systems is one of the world's leading specialized automotive component manufacturing companies for OEMs.

The auto ancillary's consolidate net profit slumped 30.5% year-on-year to 270.51 crore, while net sales declined 4.9% to 15,436.46 crore in the quarter ended December.

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