The Amtek India stock has gained 10 per cent today and has moved up by over 40 per cent since Tuesday’s opening.

Expectations of a revival in economic growth and hence, a surge in new vehicle sales have fuelled the run-up in auto and auto component stocks in recent times.

Amtek India – a company supplying iron cast components such as connecting rod assemblies, flywheel assemblies and turbo charger housing components to auto manufacturers – is no exception.

Amtek Auto stock

Secondly, with Amtek Auto being its parent company (71 per cent shareholding), the surge has been further helped by the improved interest in the Amtek Auto stock seen in the last one month.

Amtek Auto has moved up by 44 per cent in this period, thanks to improved growth expectations in key markets such as the US, Germany, UK and India.

The group’s diversified clientele both in India and abroad and its presence across segments such as two and three-wheelers , passenger cars, utility vehicles and commercial vehicles put these companies in a much better position to ride on the recovery, unlike other smaller component makers who may lack the capacities to meet high demand and the bargaining power to improve margins.

Debt-equity ratio

The Amtek stocks have also found favour in recent times, thanks to the group’s plans to reduce its debt. Leveraged acquisitions of companies such as Neumayer Tekfor, Kuepper Group ( through Amtek India) and JMT Auto during times of slowdown stretched the debt to equity ratio to about 2 as of March 2014.

The company expects to be free cash flow positive in FY15. It plans to bring down debt through higher capacity utilisation in the next two years to about 80 per cent ( from about 55 per cent now) and revenue flows from acquired companies.

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