Prakash Diwan, Director of Altamount Capital Management told CNBC-TV18, "Amtek Auto is doing the right thing by taking over companies, which didn’t have a huge customer base but had great production capabilities. Asahi Tech for example is one of the best and talking about this group itself, there is so many of ancillaries in the India that they have. I don’t even know if the glass business that they are into, they make a lot of lights, headlights and Asahi Songwon, which is the parent holding company for them is also profitable. There is no liquidity, so some of these stocks don’t get talked about much but that is a huge group which is into the auto space and they have a huge presence in India as well. Amtek is doing the right thing by buying out all these companies at low leverage. So it is always profitable to make acquisitions rather than on the other side and this will start paying off once the RoEs start crossing over the interest cost."
"Asahi is a same conglomerate of sorts which has got the maximum number of patents as vendours to auto companies globally. We don’t see it as a consumer product, in fact it is like Daewoo and the Samsungs of Korea, which used to be so large. In fact, they had to break themselves down because of the monopoly structure that they got into but auto ancillary is going to be now scaled," he said.
"So look at companies which very clearly are spending and we will keep on hearing these announcements from more of the players on spending. If Bosch doesn’t spend or if Royal Enfield doesn’t expand its capacities you cannot be getting this kind of premium for these stocks and some of these stocks are worrisome. People need to be slightly watchful the way they have run up like Eicher Motors and Bosch. The beating that they take also is as quick as the upside has been. So once it comes down, you will probably need to look, we are getting out of cyclicals, autos is not honestly one of the heavyweights for us buy auto ancillaries continues to be a promising area."
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