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Wednesday, January 19, 2022

Motherson Sumi shares fall 21%, what should investors do now?

Motherson Sumi Systems: Shares of Motherson Sumi Systems closed down 21 per cent at Rs 185.50 on Friday. The main reason for this weakness was the depreciation of the value of the wiring harness business, which will now be demerged into a separate listed entity.

Last year, Motherson Sumi had announced a restructuring of its business under which the promoter entity would be merged with the existing listed company to be called Samdhana Motherson, while the wiring harness business would be demerged.

The cut-off date for determining the eligible shareholders is January 17

Earlier this month, the company said that the cut-off date for deciding the eligible shareholders for the issue of shares of the demerged entity would be January 17. After January 17th, one share of the domestic wiring harness business will be issued in exchange for one share of the company Motherson Sumi Systems.

On 24 January, the amalgamation of the promoter entity of Motherson Sumi and Samvardhana Motherson International with the listed entity Motherson Sumi will complete with the new entity, which will be named Samvardhana Motherson.

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Domestic wiring harness business will be listed in March

Analysts expect the domestic wiring harness business to be listed on the stock exchange in March. Brokerage ICICI Direct has valued the domestic wiring harness business at Rs 70 per share, which is estimated to be its listing price.

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ICICI Direct has valued the Wiring Harness business with a premium of 40 times over 2022-23 Earnings owing to higher return from the business on capital employed and exposure to the pure Passenger Wiring Harness market.

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Brokerage firm Emkay Global Financial Services said, “The proposed restructuring exercise creates a platform for future growth through inorganic and organic routes. This restructuring exercise is a step towards the company’s Vision 2025 – a revenue target of $36 billion with a ROCE of 40 per cent.”

no need to worry about the fall

Dealers suggested that investors should not be worried about the sharp fall in Motherson Sumi’s stock today, as there is a good chance of recovery with the listing of the wiring harness business.

Disclaimer: The views and investment tips of investment experts on Moneycontrol are their own and not that of the website or its management. Moneycontrol advises its users to consult certified experts before taking investment decisions.


Shehnaz is a Corporate Communications Expert by profession and writer by Passion. She has experience of many years in the same. Her educational background in Mass communication has given her a broad base from which to approach many topics. She enjoys writing about Public relations, Corporate communications, travel, entrepreneurship, insurance, and finance among others.
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