Motherson Group looking at distributing Covid-19 vaccine through its logistics biz

Auto component major Motherson Group is eyeing opportunities in the logistics space to distribute Covid-19 vaccines in the Indian market as part of its business diversification strategy.

Motherson Group Chairman Vivek Chaand Sehgal told ET the company’s joint venture partner in logistics firm SAMRX - Japan’s Hamakyorex - has expertise in cold chain and is looking to introduce several patented technology in the Indian market.

“Absolutely (we are interested in logistics distributing Covid-19 vaccine in India)...Hamakyorex in Japan has majority of its businesses coming in the cold chain, especially in pharmaceuticals. Also they have certain patents, which we want to bring to India,” Sehgal said, adding that automotive and medication would be major growth drivers for the company going forward.

While the Indian government has pre-ordered Covid-19 vaccines to be produced by Serum Institute among others, widespread logistics will be required to deliver these effectively to 1.35 billion people across the length and breadth of the country.

The Motherson Group has initiated discussions with relevant authorities to secure orders for transportation of Covid-19 vaccines and will invest in both expanding its fleet and acquiring companies to grow business.

“We will be expanding our fleet size for sure. It (the expansion) will depend on whether we are able to secure those orders for distribution. We are currently in talks. These are things happening as we speak and if we do win those order definitely we will be making investments...We have started it organically but we are looking at acquisitions in this space to grow as well,” said Laksh Vamaan Sehgal, vice-chairman, Motherson Group.

Motherson Group launched Samvardhana Motherson Hamakyorex Engineered Logistics Limited (SAMRX), a JV company between Samvardhana Motherson International Ltd. (SAMIL), India, and Hamakyorex (Japan) in August 2019. SAMRX was originally launched to transport finished vehicles for OEM customers. At the time of launch the company said it aims to substantially ramp-up its fleet of self-owned trucks to over 1500 and employ over 3200 drivers along with other indirect employees for various support functions by FY 2023.

Overall, the Motherson Group is hoping to treble annual revenue to $36 billion by 2025 from $ 11.29 billion in FY20. While 75% of the revenues is expected from the automotive venture, the group is diversifying into sectors like aerospace, healthcare, logistics and IT to boost revenues and offset risks.

“We did a lot of seeding and eventually chose four basic ideas, where we think we can build on Motherson’s capabilities, which exist already, without making too much of investments and yet get additional businesses from these new divisions,” added Laksh Vaaman Sehgal.

The Group expects 25% of its turnover will come from these new ventures in the next five years. The Motherson Group recently raised close to Rs 3000 crore to reduce debt and lower capital costs. The company said it has a strong balance sheet and can leverage it to grow these new businesses through the inorganic route if they come across exciting opportunities. Most acquisitions, the company said, are done at the behest of customers to ensure steady growth in business.

“We are looking at M&As for our new business verticals. Some countries need approvals, validation. M&As are a better way to move faster. There is a lot of pain in the industry. Good opportunities will come. We will go for them as per requests from our customers,” said Vivek Chaand Sehgal.

As far as the market conditions are concerned, Chaand expects the demand momentum to sustain in India and elsewhere. “In United States, Europe, China, Japan, Korea numbers are looking good. We don’t have any reason to worry, customers are not holding back. In Europe, despite the second lockdown, plants are running.” He added that the company would still have to keep an eye out for any regulations passed by local authorities to curb the pandemic.