CFO Kunal Malani added that 19% of revenues come from the US, with about 90% of that being USMCA-compliant, supported by a mix of US manufacturing facilities and imports from Mexico.
For the April-June 2025 quarter of the fiscal year 2025-26 (FY26), Samvardhana Motherson reported a net profit of ₹512 crore, which is nearly half of the ₹994 crore figure last year, and also well below the CNBC-TV18 poll expectation of ₹975 crore.
The company, which has a current market capitalisation of ₹97,952.39 crore, has seen its shares lose more than 24% over the last year.
These are the edited excerpts of the interview.
Q: There is a fair amount of uncertainty. So, instead of asking you about the quarter that went by and what is likely ahead, because it’s anyone’s guess as of now, you’ve often said that the majority of your US sales are USMCA-compliant, which will have no tariff impact. Could you give us a sense of what proportion of your actual sales comes from the US? Secondly, what proportion of your sales to clients outside of the US through secondary exposure have US exposure, and what proportion of that is USMCA compliant, and what isn’t — just plain numbers?
Mital: As we mentioned earlier, most of our supplies are USMCA-compliant, and they remain so; therefore, there has not been much impact of tariffs on us. Even our exports from India are just about $10 million for this quarter, and most of them have had no impact because they are all ex-factory. In terms of the small percentage of supplies which we send to the US and which are non-USMCA-compliant, the tariffs are being passed on to the customers, and there is a lag in their impact because the tariff rates themselves were not decided on – what will be applicable on which commodity and how much. So those agreements are in process, and they will all be passed on.
So we do not expect any major impact on our business from the tariffs. That has been a very big strength of the business model of Motherson – that we are local, globally – and this quarter shows the resilience and agility with which we worked to take care of market disruptions, because many of the customers around the world, and especially in Europe, also had to rejig their powertrain model. So we are a powertrain-agnostic company, but still, we had to also make some structural changes to take care of the new models which are taking shape and to support our customers.
Q: What is the exposure to the United States, and how much of that is imported into the United States? Because, you know, on one end, people say there’s no impact of the tariff, but then there could be demand hurt as well. So tell us that.
Mital: We do not see any impact – if you see the secondary, that will be through the carmaker. So if we supply to carmakers in another region, and those cars are being imported into the US, we do not have a number for that. But with most of the agreements now being done between Europe and America, and the UK and America, those impacts will also reduce because it’s now stable, and the carmakers can make their decisions. So that stability will come in. I don’t have those numbers to give you as to exactly how much is a secondary import into the market, because that’s through the carmakers’ imports.
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Q: Primarily, of your overall exposure, how much is US? How much of that is USMCA-compliant? You say the majority. If you could put a number, that would bring a lot more clarity to the street.
Mital: More than 90% of our business is USMCA-compliant. I will pass this on to Kunal if you have a very specific number, Kunal, to give on that, because our understanding is that there are certain parts which we use in our products which are also customer-nominated, and therefore those are the ones which are not USMCA-compliant.
Malani: 19% of our revenues come from the US. Around 90%, as Pankaj was mentioning, is USMCA-compliant. We do have around 25 facilities in the US as well, so not all turnover that we’re doing in the US is coming as imports into the US. There is a fair amount of manufacturing that occurs in the US itself. And whatever is imported, a lot moves from Mexico and hence is USMCA compliant.
There are some parts which come from other parts of the world as part of the overall customer supply chain, and hence those are the ones which need to be passed on to the customers as and when the final agreements happen, which is work in progress. Because there was a lack of clarity at the customs end on what should be the actual tariff data from these parts, and as those get clarified, it is a matter of time before those will also get passed on to the customers.
Q: A lot of the clients that you cater to have cut their guidance for the full year, including Toyota, Mercedes, Ford, and a bunch of others. Could you give us a sense of what kind of revenue you expect to grow by this year because of all this uncertainty with your clients facing demand challenges? And on margins, particularly, would you have any guidance?
Malani: On the demand front, as we highlighted in the last quarter as well, Europe in particular was facing a bit of stress on some of the OEMs, which were all focused on the EV segment, and that segment was really not the one which was growing, and they hadn’t invested in the ICE and hybrid portfolio.
Having seen that, I think we also highlighted that the OEMs are working towards creating a new portfolio for both ICE and hybrids, which is then expected to come out sometime in H2. And hence, we do expect that some of these underperforming OEMs will start showcasing better performance as the new launches happen in H2.
In the meantime, keeping in mind the changed environment in Europe, we had done transformative measures announced in April, where we said we would be going after a cost block of around 50 million euros. Part of this has happened, with a cost of 14 million euros booked in this quarter itself, and this would have a payback of less than a year.
So, as we move through to H2 of this year, we should be able to see a sharp ramp-up in profitability as well, aided by multiple factors. One, as I just mentioned to you, the transformative measures will start showing impact, though a lot will also come in FY27.
In addition, we do expect H2 demand volumes to look much better in some of the traditional OEMs as they bring out a new set of vehicles. Three, some of the tariff-related pieces for which we have taken the cost until now will be passed through to the customers, and hence will improve margins in the latter quarters.
Four, many of the new greenfields, like the large consumer electronics project and the 10 or so that were implemented last year, will be ramping up, which will again aid profitability, which today is at pretty much minimal profitability as the ramp-up is occurring as we speak. So again, the latter quarters will show that impact.
And finally, some of the acquisitions that we have done – the integration of those should also help. I just want to highlight, from a growth perspective, the non-automotive part of the business, irrespective of how auto does, is growing at a very sharp clip. This quarter, we have seen a growth of around 40% in the non-automotive pieces, and that is when a large chunk of our growth capex is also going.
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Q: How do you expect that mix to shape up between auto and non-auto? Even as there are headwinds in the auto space, with non-auto growing 40%, I’m sure the contribution will increase from here on. And I specifically ask you about this year largely because, you know, the last time you joined us, you said that FY26 would grow better than FY25, and FY25 saw growth of upwards of 15%, and you also said margins would expand in the first quarter. That hasn’t happened. So that puts the pressure on the next three quarters for you to perform, which is why I wanted your thoughts on, once again, the overall outlook for the year.
Malani: We do expect that we should be able to do better than what we did last year. The extent of growth is a function now of a multitude of different variables, which continue to be at play. For example, this quarter, I don’t think we had anticipated any geopolitical issues with regards to Iran and Israel, and that had a significant impact on how both our working capital played out, given we had to again keep safety stock to manage it, and on how the freight rates rose again to sky-high levels, which meant we were incurring additional costs. This is all part of the conversations we need to have with the customers during the year, and hence, again, the latter part of the year should look much better.
Watch the interview in the accompanying video
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