MothersonSumi Systems (MSSL) is an Indian automotive components maker with a presence in mirrors, wiring harnesses, and molded plastic parts. It services multiple automakers across geographies. The Indian auto components sector is poised to benefit from recovery in overseas sales and continued domestic auto growth. Streamlining costs and improving productivity have led to stronger financials for companies like MSSL. Diversification into non-auto segments and wider exports are new revenue drivers. Moreover, India retains an edge over China as a low-cost manufacturing base due to better intellectual property protections. Key growth drivers for MSSL include sustained two-wheeler demand, India's role as a small car hub, replacement demand, and overseas

1. Executive Summary:Despite abundance of popular car brand, European automotive market has been suffering
for some time now. Car purchasing in this region has slowed down and short-term outlook is far from positive, with
a recovery 5 to 6 years away. With high fixed cost, slack demand, and changing regulatory requirements (Euro 6
emissions) existing business models appear to be unsustainable.
Luizone Group AG has to address these challenges by first, reducing dependence on Europe and focus on high
growth emerging markets such as BRIC, Indonesia, Japan and Mexico. Second, building technological advantage
to address the need of low price, small, light-weight, fuel efficient car in emerging countries.
M&A activity will play a significant role in the quest of integrating new technology in the vehicles to improve safety,
fuel efficiency and connectivity.
Auto Part Sector Analysis:Since 2008, global motor vehicle production has been supported by rapid growth in
China and other emerging countries. Consequently motor vehicles have opened plants at rapid pace to satisfy this
burgeoning demand, and part manufacturers followed. Additionally auto part aftermarket helps generate a
significant amount of revenue, and demand for this segment. For developed markets like USA and Europe during
recession some companies bankrupt while others were forced to be acquired or consolidated to survive.
Trends:Environmental pressures are leading to more efficient engines either via e-mobility or improvements to
traditional ICE technologies. With customers demanding lower prices, light weight, energy efficient,urban friendly
vehicle traditional ICE downsizinglooks best chance for fuel efficiencyrather than e-technology as of now because
of lack of infrastructure, high cost of batteries and relatively low driving distances (need more R&D).
The consciousness of safety norms for vehicle in this global arena has increased the safety content by 17% per car
which amounts to €200 per car. Global automotive airbag market to grow at a CAGR of 11.54 percenti over the
period 2011-2015.This growth is expected to increase at a much faster rate with the inclusion of EURO VI norms.
Mobility-as-a-service (Maas) is genuine alternative of car ownership in urban areas.
So, apart from concentrating on only ICE technologies, now OEM business has to cope with a range of propulsion
technologies, completely new concepts such as car sharing, internet connectivity and light-weight materials, as
well as the growing international significance of the emerging markets and overcapacity.
Country Target Analysis:
China: China’s regulatory regime is a vital consideration for the feasibility and success of any M&A transaction
with a Chinese component. The multilayer approval and registration process may affect the timeline for the
completion of the transaction and, to a certain extent, could become the most criticaland problematic step in deal
consummation. While direct acquisition of a Chinese target is subject to stricter scrutiny.
India: PV production in India CAGR 2008-12:14%, for CV: 22%, Tractor: 52%, 2/3 wheeler: 16%, Construction
vehicle: 16%. Auto component industry CAGR 2008-12 is 12%. Specifically Engine parts, Transmission,
Suspension, Brake, Body & Chassis parts growths are more than 12%. 100% FDI permitted in automotive sector
without prior Govt. approval, WTO compliant policies, robust legal system and stable foreign exchange, double
digit growth in all segment of automotive industry, increasing innovation and research make India a suitable target
destination.
Brazil:A strong growth in vehicle sales in 2012 resulting from tax reductions for car buyers, and the momentum is
expected to continue for the next couple of years. But to safeguard the local industry last year, Brazil raised taxes
on foreign-made cars by 30 percentage points, requiring companies to produce at least some cars locally to avoid
the higher tax. With the price of steel, aluminum, electronics and plastic components 10% to 20% more expensive
in Brazil than in Europe, and with costs of labor, taxes and transportation also outpacing rivals, the industry
struggles to compete abroad.
Mexico: With the resurgence of US economy, and recovery from its recessionary lows North America was the
second largest target region for the first half of 2013, reduction in currency volatility and stable growing
environment are most look after aspect for this region. Mexico considered to be best for North America.

2. Company Target Analysis:
MothersonSumi Systems
One of the largest manufacturers and suppliers of plastic components to automotive industry. One of the most
diversified groups in the Indian automotive industry. Largest manufacturer of automotive wiring harnesses in India,
with more than 65% market share in passenger car segment, serving the entire automotive industry. Manufacturing
unit present in China, Brazil, Mexico and Japan. Optimal foundation for the development of numerous innovative
solutions for the automotive industry, to substitute metal by lighter, cheaper and environmental friendly polymer.
Total sales increased 72% (19% within India and 90% outside India), Net profit changed by 71%, PBT increased
by 103%. Net Profit in 2012-13 is 4445 million INR.
AMTEK Group
Amtek Auto is headquartered in New Delhi and is one of the largest integrated automotive component
manufacturers in India with a strong global presence. The Company has world class facilities in India, Europe and
North America. Amtek Auto has significant expertise in forging, grey and ductile iron casting, gravity and highpressure aluminum die casting and machining and sub-assembly. The Company also manufactures components
for non-auto sectors such as the railways, specialty vehicles, and aerospace, agricultural and heavy earth moving
equipment.Focused growth in non-auto (agriculture tractor, 2/3 wheeler) segment. 25% revenue growth, 28%
EBITDA growth in 2012-13.
Toyoda Gosei Ltd.
Japanese Auto Part Company with 28 billion yen capital, 599.6 b yen net sales, 21.4 b yen net profit. Diversified
portfolio in automotive sealing products, functional parts, interior and exterior parts, safety system and
optoelectronic parts. Well presence in Asia and Oceania (144 b yen), Japan (315b yen) and North America (124 b
yen). High growth in net sales and net profit from last year. 28% sales come from safety system product.
Delphi Corp
Delphi is a leading global supplier of electronics and technologies for automotive, commercial vehicle and other
market segments. Delphi delivers real-world innovations that make products smarter and safer as well as more
powerful and efficient. Delphi is committed to offering hybrid vehicle manufacturers and consumers affordable
power electronics. Through radar, vision and vehicle integration expertise, they have developed the most
innovative active safety systems to help make high-performance safety features affordable in the volume vehicle
market. Delphi produce 3-D integrated navigation radio systems with real-time traffic, enhancing convenience and
productivity. Apart from Europe in all the region revenue, EBITDA and Net Sales increased significantly post 2008.
Budgeting for the Acquisition:
The financial analysis of Luizone Group AG clearly indicates that the company is a highly levered firm with a Debt
to total capitalization ratio of 0.32 and 0.33 respectively (FY11 and FY12).There is a significant increase in the
short term debt (assuming term structure of 2 to 3 years) of around 46% for the FY 2012.The company‘s Interest
Coverage Ratio is only around 1x times the interest expense.
Given the weak macroeconomic scenario in Europe and Germany where company’s sales amount to total of 60%
of sales volume, default in account receivable from this part is quite formidable risk for the company, where the
company‘s account receivable is almost 39% of total current asset.Under this financial situation a LBO is only
option as the company may face a high liquidity crunch situation in the coming years creating an operational risk.
The company has a ROA of only 11.2%, which indicates the company has a significant amount of non-earning
asset. From the assumption considered (25% divestment), the company can earn a divestment cash of almost
€250million (BV-pessimist view) to €350 million (modest MV) depending on the market value to book value
ratio.The divestment of noncurrent asset can facilitate the required cash in addition of leverage.
So, according to our analysis MothersonSumi Systems would be the final target as it has favorable M&A norm,
presence in high growth market, strong management, sustainable cash flow to cover the leverage, Substantial
R&D in light weight material,low cost skilled labor, expertise in plastic material, high net profit and PBT growth and
diversified portfolio makes it an attractive target. Also Luizone Group AG comes with High-Tec technology with it
which can be leveraged by MothersonSumi System and the synergy will be established.

3. MSSL is a diversified auto parts
maker with a presence in automotive
mirrors, wiring harness and molded
plastic parts. Along with its overseas
subsidiaries – SMR and SMP –
MSSL services multiple OEMs
across geographies including VW,
Hyundai, Maruti, BMW, etc.
The Indian auto components sector is primed to benefit from
recovery in overseas sales and continuing growth in the domestic
auto sector. Streamlining of costs and improving productivity
have led to healthier financials; also, diversification in non-auto
segment and wider exports coverage are new revenue drivers.
Moreover, with skilled manpower readily available, India continues to retain
its edge as a low-cost manufacturing base. A key area where India scores
over China is in the better protection afforded to intellectual property rights
(IPRs).
growth drivers:
1.
2.
3.
4.
Sustained two-wheeler demand:
India, a global small-car hub:
Replacement demand:
Overseas automobile recovery
Given the cyclical trends in the auto industry, players are diversifying/derisking
their business models; We believe that diversified companies would be better performers.
Diversifying into the non-auto sub-segment, upgrading to noncommoditised
products and broadening the product range would lead to
companies emerging stronger.
Risks
Prolonged
weakness in the key Indian / European markets, and any further
acquisitions by MSSL group could stretch gearing ratios
Rising commodity costs may squeeze margins, particularly in domestic
operations.
Increasing fuel prices and interest rates may arrest auto demand due to
higher costs of acquisition and ownership.
Slower-than-expected recovery in Europe and US auto demand would
delay the growth trajectory for export-oriented companies.