Samvardhana Motherson Plans Rs.5,000 Crore Capex for FY25

Samvardhana Motherson Ltd., a big name in the global automotive components industry, has announced plans to invest up to Rs 5,000 crore in capital expenditure for the FY25, followed by a strong first quarter, during which the company reported growth in both net profit and revenue. However, Chief Financial Officer Kunal Malani has indicated that this projected expenditure might require recalibration due to the acquisition of new businesses.

Financial Performance: Q1FY25

The company came up with a good performance with consolidated net profit for the first quarter of FY25 reaching Rs.1,097.18 crore, marking a huge 69% increase compared to the previous year. Revenue from operations also saw a rise of 28.5%, reaching Rs.28,867.96 crore.

Margins & Deleveraging 

Samvardhana Motherson saw an improvement in its margins during the June quarter, with the operating margin expanding by 100 basis points to 9.6% from 8.6% in the previous year, the margin growth is significant given that the entire FY24 margin was 9.3%. The company also assimilated an M&A revenue pool slightly exceeding Rs.6,000 crore in this quarter.

In terms of leverage, Samvardhana Motherson is working on  deleveraging, aiming to reduce its leverage ratio to 1 times. As of the first quarter, the leverage ratio was maintained at 1.5 despite the growth in revenue and ongoing capital expenditure.

Demand Dynamics & Market 

Chief Operating Officer Pankaj Mittal highlighted that the company’s performance gives a positive outlook given the stagnation in the global automotive industry. He also mentioned that while demand is huge in developing economies, developed markets are experiencing a softening due to uncertainties surrounding powertrains. However, the company remains “powertrain agnostic,” prepared to cater to all vehicle types.

Conclusion: In conclusion, Samvardhana Mothebig capex plans and strong financial performance in Q1 FY25 brings out its market adaptability. With a focus on deleveraging and maintaining healthy margins, the company seems well-positioned to deal with the complexities of the global automotive market.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.