Motherson Group to reportedly acquire Italian auto components maker Marelli – here’s what it means

• Motherson Sumi is the largest auto components maker in India, with market capitalisation of over $8 billion.
  
• Marelli, the Italian auto components maker, is a slightly larger company, which posted a revenue of $11 billion in 2021-22.
  
• In the past, it has manufactured automotive light systems and other components in partnership with Marelli.
  

Motherson Group, the parent company of Motherson Sumi, India’s largest automobile components maker by revenue, is reportedly close to acquiring Italian auto components maker, Marelli.

According to a report by The Economic Times, if the deal goes through, the acquisition of Marelli will propel Motherson Sumi amongst the top-ten auto component makers in the world.


Motherson Sumi already has past experience with Marelli – it had entered into a joint venture with the Italian company to manufacture suspension, heating, ventilation, air conditioning and automotive lighting systems.

In 2021-22, Marelli posted $11 billion in revenue, but had to undergo debt restructuring with liabilities of over $8 billion.

In comparison, Motherson Sumi’s market capitalisation stands at a little over $8 billion – essentially, Marelli is a bigger company than Motherson Sumi. However, Marelli’s financial struggles make it an interesting candidate for the Indian auto components maker – something which it has done several times in the past.

Who are Motherson Sumi’s competitors?

Minda Industries and Sona Comstar are some of the Indian peers of Motherson Sumi, but their market capitalisation is lesser than the others.

Here’s how the three companies measure up:

Company	Motherson Sumi	Sona Comstar	Minda Industries
Revenue	₹16,241 crore	₹499 crore	₹2,194 crore
Net profit	₹245 crore	₹86 crore	₹101 crore
Market capitalisation	₹62,900 crore	₹36,900 crore	₹26,900 crore

Source: December 2021 quarter, as per company reports, market capitalisation as on April 12, 2022.

What are the analysts saying?

According to the report, Marelli has six other acquisitions in its pipeline. Analysts are also positive about Motherson’s reorganisation, “The company’s scheme of reorganisation continued as expected, and this lays the foundation for Motherson 2.0,” stated a report by Geojit.

Brokerage	Recommendation	Target price	Upside
Chola Securities	Out performer	₹186	33%
Geojit	Hold	₹187	34%
ICICI Direct	Hold	₹185	32%

Note: Upside as compared to the current market price of ₹138, as of April 12, 2022

Although Motherson’s shares are down by nearly half in 2022 so far, analysts suggest that improving industry conditions and increasing orders are the key growth drivers for the company.

But material shortages and surge in raw material prices remain key issues, and analysts recommend remaining cautious on the company’s stock.

“We maintain hold rating on the stock amid slower-than-anticipated recovery in passenger vehicle auto volumes globally amid persisting chip shortage,” said a report by ICICI Direct.

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