After falling over 7.5 per cent on Monday, the share price of Motherson Sumi Systems plunged further by over 7 per cent on Tuesday. The share price of the company has been under pressure after the German automaker Volkswagen halted sales of many of its diesel power automobiles in the US, after EPA accused the company of rigging its vehicles to manipulate pollution data during vehicle testing.
Volkswagen accounts for 44 per cent of Motherson Sumi’s consolidated revenue, Bloomberg data showed. The share price of the company closed 7.72 per cent down at Rs 241.90 on Tuesday.
According to JM Financial Institutional Securities, the incident will impact Volkswagen US volumes in near-medium term, lead to penalty in US and increased focus on diesel engines across key markets in the world. The brokerageg house also sees limited impact of the same on Motherson given Volkswagen’s limited revenue contribution from US, Volkswagen’s extensive brand portfolio (Volkswagen, Audi, Seat, Skoda, Bentley, Bugatti, Lamborghini, Porsche, Ducati, Scania and MAN), Motherson’s (MSS) relatively higher exposure to Audi (compared to Volkswagen brand, which will see maximum impact), MSS’s limited exposure to Americas, and MSS’s revenue diversification efforts (recently won a big order from Daimler in the US).
In a research report, JM Financial said, “We estimate that the models impacted by this incident account for less than 3 per cent of MSS’s consolidated topline (assuming 60 per cent of its US exposure comes from Volkswagen group and half of that comes from above mentioned Volkswagen brands).”
In the past one year, the share price of Motherson Sumi Systems declined 4 per cent to Rs 262.15 on September 21. Sensex lost 3 per cent during the same period.