Return On Technical Collaborations

Motherson Sumi Systems has announced a string of technical collaborations and this strategy continues to be the mainstay. Ashish Bhatia with Deepti Thore looks at their importance, recovery and expected returns.

-  Ashish Bhatia with Deepti

Motherson Sumi Systems Ltd. (MSSL), among the largest auto ancillaries, has done everything in its capacity to limit the global headwinds from impacting India operations. The wiring harness manufacturer turned diversified company is claimed to have controlled costs as well as partially recovered revenue encompassing Samvardhana Motherson International Ltd. (SAMIL) and subsidiaries which in turn are known to have aided in a strong operational performance. The company registered a revenue of Rs.14,881 crores and an EBITDA of Rs.1,208 crores in the second quarter of FY2022 (Q2FY22) compared to an EBITDA of Rs.1,462 crores in Q1FY2022. Notably, production costs are known to have increased owing to irregularity in product trends led by Original Equipment Manufacturers (OEMs). Here supply chain constraints are known to have induced a sharp drop in OEM production levels across geographies. While the company, in the long run, expects the technical partnerships to reap rich dividends, in the short term, drop-in volumes and operational revenues have been challenging to deal with for technical Joint Ventures (JVs). MSSL announced new acquisitions like Bengaluru-based CIM Tools (India) where the company has acquired a 55 per cent stake. CIM Tools is a key supplier in the aerospace supply chain where it engages in machining and sub-assembly of components. Some of its key products include structural machined parts and sub-assemblies for aircraft doors, wings, tail, fuselage and landing gears. MMSL has also acquired a 60 per cent stake by Ningbo SMR Huaxiang Automotive Mirrors Ltd.