Last week, Sehgal did something that was against this script. Motherson Sumi's acquisition of Finnish wiring harness maker PKC group was neither a distress sale nor a turnaround candidate. In 2016, PKC's revenues stood at Euro 846 million (Rs 6183.2 crore), roughly the same as the previous year. The Indian firm's all cash offer to the Finnish firm's shareholder's of Euro 23.55 was also at a 51 per cent premium to the firm's closing price on Thursday. If the shareholder's approve the offer the enterprise value of the company at Rs 4,150 crore would also make this Motherson's most expensive buy out yet far out stripping the $ 82 million it had paid for 80 per cent stake in German polymer major Peguform in 2011.
"The prospect of two global teams coming together and the synergies that will be brought about is very exciting to us," said Sehgal after the buyout offer was made public. "It will allow us to create huge value for our customers and to service our customers in additional locations in the world."
As the many acquisitions show, the company that started in the early 80s as a humble T Couple maker for the Maruti 800, has always been aggressive. In 2001, less than 1 per cent of its revenues came from outside India. In 2005, 71 per cent of its revenues came from India. By 2015, that shrunk to just 16 per cent while 58 per cent of its revenues came from Europe. Today, 85 per cent of its revenues comes from overseas. The diversification helped the company grow big. From revenues of just Rs 83 crore in 1999, MSSL is now a Rs 37,000-crore ($5.7-billion, consolidated revenues FY 2016) entity, with profits of Rs 1,291 crore. With 145 factories spread across 25 countries, Sehgal's is not only India's largest automotive component firm but also a truly global one now that highlights the best of Indian ingenuity.
"In the last decade or so, the component industry has definitely come of age," says Vinnie Mehta, director general, Automotive Component Manufacturers Association.
"There was a time when Indian companies had to be dependent on their foreign counterparts for critical parts. Today, they do it on their own. Most of the small cars in India have high local content of upto 98 per cent and in some cases even 100 per cent. And these cars in turn are exported to developed markets. Even components are being exported all over the world. It shows how far the industry has come."
Like all big and successful companies, Sehgal's start was also small. A meagre Rs 1,000 was all Sehgal had as seed capital when he ventured into the business of making electrical wires and for decades, it remained a small player. The breakthrough year was 2009 when the world was reeling under the shock of Lehman crisis. Sehgal hit gold with the acquisition of UK-based Visiocorp's global rear view mirror business. He quickly followed up with the buyout of distressed German polymer major Peguform in 2011. It took Motherson's revenues (consolidated) up from Rs 8,175 crore in 2011 to Rs 14,702 crore in March 2012.
"We always acquire what our customers suggest," Sehgal had said then. "It's not a case of acquiring just an overseas asset, but an opportunity to serve our customers better."
Even then, the PKC acquisition can be the cherry on the cake. Renowned for his 5 year plans where he sets stiff targets for his companies, it is expected to help the company achieve the $ 18 billion revenue target stipulated for 2020.
The Finnish company is a leading supplier of wiring harness, already a key component in MSSL's portfolio. But it supplies to companies that make heavy- and medium-duty commercial vehicles and locomotives across North America, Europe, Brazil and China, geographies where MSSL is not adequately represented. The acquisition expands its presence in the commercial vehicles segment with minimal overlap between existing operations of the two companies.
"It looks like a good fit but MSSL carries substantial debt at a consolidated level so there are risks," says an auto sector analyst. "Also, PKC for all its strength is stagnating and does not offer very good margins. It may require some investments in products before it starts delivering the returns that stock markets will like. It is not a distressed asset but developed markets in the global automobile industry are not exactly revving."
If anything, at least Motherson Sumi is revving.