Wiring harness maker Motherson Sumi Wiring India's Chief Operating Officer Anurag Gahlot said that the company is on track to achieve its 40% return on capital employed target in the ongoing financial year.
Gahlot told NDTV Profit that ROCE is a better metric for assessing a company's financial performance than Ebitda. “As a company or group guideline, we have to be more than 40%. As you've seen in the last year, we have done 48% ROCE. And before that, we did around 44%," he said, pointing out that this year too, in the first half so far the company has been "absolutely" on track.
Gahlot added that while achieving ROCE targets depends on customers and their volume projections, the company is working to ramp up efficiency as well. “There is a lot of work which is going on at the production floor, because teams are working very hard on the operational efficiencies so that we can do a lot of improvement onto the production shop floor and the productivity terms,” he revealed.
Motherson Sumi Wiring India Ltd. posted a flattish performance in the July-September quarter, as net profit rose only 2.6% year-on-year to Rs 152 crore against Rs 156 crore a year ago.
Revenue from operations jumped 10.3% YoY to Rs 2,326 crore compared to Rs 2,109 crore.
Referring to the second quarter numbers, Gahlot asserted, “Profitability remained resilient, despite the additional cost incurred due to the ramp-up phase of two greenfield projects, which are giving a metric to the customer. So, these are the ramp-up costs, which are part of our current PNL (profit and loss).”
Elaborating the ramp-up cost, Gahlot said, “And this cost goes into the hiring of manpower, where you have to train your manpower to start giving a production to a scale where you can give a good quality and a quantity product to the customer.”
The top executive added that the company is taking on a challenge to continue expanding. He explained, “We are taking a lot of help on digitisation and automation. The wiring harness is a labour-intensive product... But we are taking on a challenge to keep doing the expansion.”
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