Motherson Sumi Systems Ltd.'s shares surged as much as 16 percent in the past three days of trade after the auto components maker came up with a business update to deal with the coronavirus crisis.
“We expect demand to come back to pre-Covid-19 levels by June-July,” Laksh Vaaman Sehgal, vice chairman of the Motherson Group, told BloombergQuint in an interview. “We don't believe there will be a depression, markets will come back very strong as there's pent-up demand.”
Sehgal said the rise in demand will be led by preference for personal vehicles over public transport due to health concerns. That comes as the auto sector is grappling with the worst slowdown in more than two decades.
To be sure, brokerages are cautious on Motherson Sumi due to its geographical spread and the forex risks that it faces. But Sehgal said majority of the company's plants in Europe would reopen by the middle of May. “We've implemented reopening policies.”
The company said that as of March 31, its net debt fell to an eleven-quarter low of Rs 7,150 crore. “We don't have any major debt maturing in the next 12 months,” Sehgal said.
Motherson Sumi's ratings have been cut over the past few weeks. Moody's placed the company's corporate family rating “under review for further downgrade” in March and Fitch Ratings Inc. downgraded Samvardhana Motherson Automotive Systems group BV's long-term issuer default rating to ‘BB' from ‘BB+' this week.
Also Read: Maruti Suzuki Sees Personal Vehicles Making a Come Back
Motherson Sumi, however, plans to raise Rs 1,000 crore in debt to enhance liquidity, for which its board today approved the issuance of non-convertible debentures worth Rs 500 crore. Cash generated from new plants set up for new orders will be used to repay debt once the lockdown ends, he said.
WATCH | Motherson Sumi On Coronavirus' Impact On Auto Sector
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