Motherson Sumi could be interesting bet: Vinay Khattar

Vinay Khattar of Edelweiss Financial Services told CNBC-TV18, "The world has been riveted to the TV screen in terms of what's gone wrong with the Volkswagen 11 million cars being impacted with the glitch which will cause the nitrogen oxide level to be mis-reported. It's a clear case where the company has made a mistake, it is a clear error and there could be penalties including the criminal liabilities which could emanate out of US. However, globally you will find that a hit of such a large-scale is not very common and that is what is reflected in the stock price." "Our sense is that Volkswagen itself is sitting on huge amount of cash almost USD 30 billion, plus it generates operating cash of about USD 10 billion every year which is a very large sum. So will the company be able to take the knock and move on? Our sense is yes, though the criminal liabilities or the class action suits could have seen significant impact in terms of this cash reserves, but how does a consumer in Western countries behave in terms of their actual demand for diesel cars and what could be the impact on market share of Volkswagen both in Europe as well as in US, is going to be the key question and that is one answer that we will have to wait for because I do not think even Volkswagen or Audi has a sense today what will play out," he said."It leads us to the companies which are auto ancillary suppliers to these companies. Motherson Sumi Systems has been one of the key auto ancillary suppliers. It has been our favourite for last two or three years. We have liked the stock very much at about Rs 100 or Rs 95 and it has been our top buy but our sense is that with what is playing out in Volkswagen; there are near term headwinds, some of which has already got factored into the price over last month or so. May be in the near term, the stock will stay at these levels and wait for more information that could emanate out of the data in Western markets in terms of demands for both Volkswagen as well as Audi cars. If the demand shows no disturbance and demand continues to remain robust and picks up, I think Motherson Sumi could be a very interesting bet going forward," he added.