Samvardhana Motherson International sets an ambitious target to reach $108 billion in revenue by FY2030, bolstered by acquisitions, diversification, and a focus on profitability amid industry expansion and operational restructuring challenges.
Samvardhana Motherson International Ltd, a prominent player in the global auto components sector, has announced an ambitious growth strategy aiming for $108 billion in revenue by FY2030—more than four times its current scale. Alongside this, the company targets a 40% return on capital employed (RoCE), emphasizing a focus on enhancing profitability and operational efficiency. This outlook aligns with a broader industry trajectory; by FY25, India’s auto components and equipment sector reached approximately $80.2 billion in turnover, marking a 9.6% annual growth driven by vigorous vehicle production, electrification efforts, and technological advancements. Industry projections estimate that by 2026, this sector could constitute up to 7% of India's GDP, underscoring its increasing economic importance.
Strategically, Samvardhana Motherson is expanding its global footprint through diversified operations across multiple countries, deliberately avoiding reliance on any single market for more than 10% of its revenue. The company predominantly anticipates over 75% of its growth stemming from recent acquisitions. It also plans to list additional group entities and maintain a dividend payout ratio of up to 40%. Although US tariffs on Indian auto parts have posed concerns, the company reports that their direct impact has been minimal, given that most U.S. sales are USMCA-compliant, with tariff mitigation supported by localization initiatives; for non-USMCA-compliant parts, agreements are in place to pass on related costs.
Investment analysts have expressed confidence, with InCred upgrading its rating to an ‘add’ with a target price of Rs 117, indicating a potential upside of approximately 24%. JPMorgan and Jefferies have also maintained positive outlooks, issuing ‘overweight’ and ‘buy’ ratings with target prices of Rs 105 and Rs 110, respectively. Nonetheless, some cautioned that achieving a fourfold increase in sales over five years is highly ambitious, and reaching the 40% RoCE target will be critical in validating the company’s aggressive growth projections.
The latest quarterly results from Q1 FY26 serve as a nuanced indicator of progress. The company reported a revenue of Rs 30,212 crore, a 4.7% year-on-year rise, reflecting steady top-line growth. However, net profit experienced a significant downturn, reported at Rs 606 crore in one source, or approximately Rs 512 crore as per other reports. This profit decline, ranging from about 39% to nearly 49% compared to the same quarter previous year, was mainly attributed to structural challenges in Western and Central Europe, as well as costs related to integration and restructuring initiatives. The company has initiated a EUR 50 million cost-saving plan in Europe, with Rs 136 crore booked in restructuring expenses in Q1, with expected operational benefits materializing in the later part of the year.
Margins were under pressure due to initial costs associated with launching multiple greenfield units, though management remains optimistic that ramp-up over upcoming months will improve profitability. Capital expenditure guidance for FY26 remains at Rs 6,000 crore, evenly split between growth and maintenance, with Rs 1,200 crore invested in Q1. Currently, three greenfield units are operational, and eleven more are under development, targeting markets beyond automotive applications, including electrical distribution systems, vehicle interior and exterior modules, rear vision systems, plastics, lighting, electronics, precision metals, and telematics.
Regarding exposure to tariffs, the company notes that its direct exposure remains limited, with exports to the U.S. amounting to less than $10 million in Q1 FY26. Most US sales are USMCA-compliant, supported by localization efforts, and the company has arrangements to pass on costs for non-compliant parts, helping to mitigate tariff risks. Additionally, the company is actively exploring new supply chain solutions to further insulate itself from potential disruptions.
In summary, Samvardhana Motherson is positioning itself for significant long-term growth through aggressive expansion, strategic acquisitions, and operational enhancements. While the recent quarterly results reflect some near-term margin pressures and execution challenges, the company’s overall trajectory demonstrates confidence in its ability to leverage industry growth and capitalize on new markets. Monitoring its progress toward RoCE targets and successful integration of acquisitions will be key indicators of its future success.
Source: Noah Wire Services
