Motherson Sumi Systems Ltd (MSSL) is one of the largest manufacturers of components for the automotive and transport industries worldwide. The company is well diversified with many divisions and businesses. The Wiring Harness and electrical components division is one of the largest globally with a strong presence in India, China, Europe and North America with 77 facilities serving across 22 countries. It has a solid joint venture with Sumitomo Wiring Systems since 1986 apart from other joint ventures in Korea and China. The other businesses namely, the interior and exterior components division, metal spacing components, lighting and electronics division, etc are market leaders in their own right having manufacturing facilities across the globe. With MSSL spread across around the world, the company had a case of reorganisation to strengthen its financial capability and create strong separate entities. The proposed group restructuring has been approved by the shareholders and creditors paving the way for MSSL to approach NCLT to approve the scheme now. The company management has set the reorganisation of MSSL to demerge the Wiring Harness business division out of MSSL and list separately on the stock exchanges. For every one share held in MSSL, one share of the new company would be allotted. After the demerger, group firm Samvardhana Motherson International Ltd SAMIL would merge with MSSL bringing all the auto component and allied businesses under MSSL. Herein, for every 10 shares held in Samvardhana Motherson International Ltd, 51 shares of MSSL would be allotted. Also, MSSL would be named as Samvardhana Motherson International Ltd. Post all approvals and everything, two growth focused listed companies would emerge out of the reorganisation in the next six months. The proposed reorganisation was necessary to simplify the group structure, create a separate entity for the wiring harness business, create a strong platform for growth as well as offer greater operational and financial flexibility. All this bodes well for shareholders and they can accumulate solid gains in the next 12 months time frame by buying Motherson Sumi Systems Ltd (MSSL) from the market currently priced at around Rs 228. Analysts and fund managers tracking the auto sector are betting on MSSL and hence portfolio investors can invest in MSSL now and expect good appreciation in the stock after the proposed company restructuring and listing of new entities.
Domestic equity markets traded within a narrow range on Friday as downgrades in growth forecasts in the GDP for FY22 and slowdown in the vaccination programme kept the investors indecisive about the market direction. The BSE Sensex ended the truncated week up 41 points at 48732 levels, while the NSE Nifty closed at 14677 levels, down by 18 points. The FMCG index was a star performer up by 2% with individual consumer stocks like ITC, HUL and Nestle up nearly 2-4%. The market breadth was overall quite weak and showing indecisive direction. Since the last few weeks, the indices continue to consolidate in the 14400-15000 levels and have to break out of this band to show any firm direction.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.