Samvardhana Motherson to acquire Ichikoh's mirror business in Rs 293 crore deal

Samvardhana Motherson sees plenty of synergies to increase its presence in the Japanese market and among Japanese car OEMs post the acquisition of Ichikoh's mirror business, Vice Chairman Laksh Vaaman Sehgal told CNBC TV-18 in an interview.

Counted among the world's largest automotive suppliers for original equipment manufacturers (OEMs), the company announced the acquisition of Ichikoh Industries' mirror business for ¥5.2 billion (Rs 293 crore at current exchange rate).

This is Samvardhana Motherson's first acquisition through its Vision Systems business division.

The transaction will include Ichikoh's mirror business which develops and manufactures automotive mirrors and associated products in Japan and China, catering largely to Japanese OEMs.

Although a smaller player in Japan, a physical footprint in the country is very important to supply to Japanese carmakers and that, according to Sehgal is an advantage with Ichikoh.

Motherson will end up adding three manufacturing facilities across both the countries and 260 patents to its IP portfolio post this transaction.

"This acquisition is the next major step in line with the Group Strategy of 3CX10 with increased geographic and customer diversification," the company wrote in its exchange filing. Motherson's 3CX10 strategy involves ensuring that non-component, no country or no customer contributes more than 10 percent of the overall top line.

Subject to customary conditions, the transaction is likely to be completed over the next 6-8 months.

Ichikoh's mirror business reported revenue of JPY 15.8 billion in 2021, down from JPY 22 billion in 2019. The company is a key supplier of automotive mirrors to Japanese OEMs in Japan, China, and Thailand.

This is also Motherson's third acquisition under the vision systems business during the current five-year plan, following acquisitions in Turkey and China. The company acquired a majority stake in Turkey's Plast Met in January last year for an undisclosed sum, followed by a majority stake in China-based Nanchang JMCG Mekra Lang Vehicle Mirror Co. Ltd. without disclosing the financial terms of the deal again.

Motherson's Vision Systems division serves customers from 37 facilities across 18 countries. This division supplies exterior mirrors, interior mirrors, and camera-based detection systems to leading global automotive OEMs.

The transaction is EPS accretive, according to the company.

"We will be able to sell more advanced mirrors and be able to increase all parameters but since we focus on RoCE (Return on Capital Employed), we will try to get this to a 40 percent RoCE as soon as possible," Sehgal said. Current return ratios of Ichikoh are subject to closure of the transaction.

Gurmeet Chadha of Complete Circle believes that cost pressures affected Motherson on the margin front, even as they are clear leaders in this space, especially in rearview mirrors. However, he prefers UNO Minda over Motherson but the latter continues to remain on his radar.

A few weeks earlier, Motherson had acquired Daimler India Commercial Vehicles' frame manufacturing and assembly operations facilities in Chennai. The deal made Samvardhana the sole supplier of frame assembly to Daimler India CV for the next 10 years. The company sees a revenue potential of Rs 300 crore through this acquisition.

Shares of Samvardhana Motherson International are trading 1.6 percent lower at Rs 116.20, as of 9:40 AM.