Samvardhana Motherson deal divides Street: Nomura bullish, Kotak stays cautious

Shares of auto components manufacturer Samvardhana Motherson International Ltd. are trading up to 3% lower from the day's highs on Tuesday, December 23. The stock touched a 52 week high of ₹122.80 earlier in the session, even as it remains well below its record high of ₹144.67 hit on September 27, 2024.

The move comes a day after the company announced that it has entered into exclusive negotiations, through its subsidiary Motherson Global Investments, to potentially acquire 100% of the global wiring harness business of Nexans AutoElectric GmbH.

The proposed transaction values the business at an enterprise value of €207 million on a cash and debt free basis, with the final consideration subject to closing adjustments.

Brokerage views on the deal remain mixed. Nomura has maintained its 'Buy' rating on Samvardhana Motherson with a price target of ₹125 per share.

The brokerage said the acquisition would help the company foray into the global passenger vehicle wiring harness segment through what it termed an attractive valuation.

Nomura expects the deal to be cash EPS accretive, citing that the acquisition is valued at 4.3x CY24 EV EBITDA and could lead to an EPS accretion of about 2% in the first year itself. It added that the stock is currently trading at around 18 times FY28F EPS.

On the other hand, Kotak Institutional Equities has retained its 'Sell' rating on the stock with a target price of ₹95 per share. Kotak said Samvardhana Motherson has agreed to acquire a 100% stake in Nexans AutoElectric for €207 million, subject to regulatory approvals, at a similar valuation of 4.3x CY2024 EV EBITDA.

The brokerage expects the acquisition to be marginally EPS dilutive in the near term, although it acknowledged that the deal would help Motherson broaden its global customer base by leveraging AutoElectric's engineering capabilities, proximity to premium OEMs, and its expertise in low voltage and high voltage wiring harnesses.

Muted global passenger vehicle trends and an expensive valuation underpin Kotak's cautious stance.

Samvardhana Motherson International shares are currently trading 0.27% lower at ₹120.78. The stock is up close to 17% so far in 2025.