Intrsting indeed. A quick research gave these insights 
Atul as of now just has E-Rickshaws in EV. The cost is around 1 lakh for e-rick. I am not sure, but I think the subsidy here would be for two-wheeler. Rest would be how e-rick is covered in it.
https://atulauto.co.in/product-details.aspx?cid=4&pid=27
None of their 3 wheelers are yet operated on EV.
Disc : Invested.
Well I think, Linkedin gives me more info, then Google.
Again, one of the employee is rewarded for a promotion & he shows it off on Social Media.
We as an Investor get real insight.
The spare & Allied business had a 30% YOY growth that too in a difficult year, specially when the whole business has shown huge de growth & loss. I think, there is still grt things happening with in the organisation.
Disc : Invested & am sure, am biased.
Thanks for sharing this useful data point, here is how spare sales has looked in the past.
| Year | Spares revenue (cr.) |
|---|---|
| FY14 | 11.36 |
| FY15 | 13.15 |
| FY16 | 15.58 |
| FY17 | 15.40 |
| FY18 | 21.61 |
| FY19 | 27.34 |
| FY20 | 27.46 |
What all products do they sell under Spare & Allied business ?
Here are my notes from their AR21
Below are the detailed business metrics over the last 15 years.
| In crores | FY07 | FY08 | FY09 | FY10 | FY11 | FY12 | FY13 | FY14 | FY15 | FY16 | FY17 | FY18 | FY19 | FY20 | FY21 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Net sales | 121.77 | 80.39 | 116.81 | 119.85 | 201.59 | 298.29 | 362.86 | 429.25 | 490.07 | 528.00 | 472.19 | 551.22 | 661.35 | 617.51 | 290.27 |
| Raw material cost | 91.60 | 156.20 | 241.86 | 283.15 | 330.39 | 372.20 | 384.87 | 346.15 | 402.20 | 494.97 | 443.13 | 239.19 | |||
| Employee cost | 7.03 | 10.54 | 16.48 | 21.01 | 27.36 | 30.30 | 34.91 | 39.04 | 40.13 | 47.68 | 54.55 | 37.74 | |||
| EBITDA | 8.75 | 6.86 | 5.69 | 14.20 | 20.06 | 28.14 | 42.06 | 48.31 | 57.61 | 71.52 | 59.86 | 75.12 | 88.35 | 74.46 | -5.76 |
| Depreciation | 1.95 | 2.29 | 2.46 | 3.87 | 4.25 | 4.26 | 4.44 | 5.21 | 5.60 | 5.29 | 5.28 | 5.26 | 5.54 | 6.40 | 6.56 |
| Exceptional items | - | - | 0.23 | - | - | 0.13 | - | - | 1.65 | - | - | - | - | - | - |
| Interest | 2.78 | 1.71 | 0.76 | 0.40 | 0.35 | 0.59 | 0.78 | 0.58 | 0.42 | 0.86 | 1.03 | 0.88 | |||
| PBT | 7.15 | 14.06 | 23.24 | 37.22 | 42.75 | 59.25 | 71.53 | 56.52 | 69.43 | 81.95 | 67.03 | -13.20 | |||
| Tax | 2.61 | 4.64 | 8.40 | 11.30 | 12.95 | 19.20 | 24.35 | 19.20 | 23.24 | 28.83 | 14.64 | -3.00 | |||
| Cash tax | 1.22 | 4.94 | 6.96 | 12.19 | 13.37 | 16.47 | 25.36 | 19.53 | 23.20 | 27.10 | 19.40 | 0.29 | |||
| PAT | 3.15 | 1.27 | 0.46 | 4.54 | 9.42 | 15.59 | 25.92 | 29.79 | 40.57 | 47.40 | 37.32 | 46.19 | 53.12 | 52.39 | -10.20 |
| Dividend | 0.54 | 0.29 | 0.29 | 1.17 | 2.34 | 3.66 | 6.58 | 8.23 | 10.98 | 11.51 | 11.51 | 9.33 | 11.52 | 6.03 | - |
| Dividend tax | 0.38 | 0.59 | 1.12 | 1.40 | 2.22 | 2.35 | 2.35 | 1.90 | 2.37 | 1.24 | - | ||||
| Equity share capital | 5.58 | 5.58 | 6.08 | 6.08 | 6.08 | 7.55 | 10.97 | 10.97 | 10.97 | 10.97 | 10.97 | 10.97 | 10.97 | 10.97 | 10.97 |
| Reserves | 20.52 | 21.08 | 24.39 | 27.56 | 34.27 | 48.54 | 63.10 | 83.27 | 109.86 | 143.40 | 169.50 | 208.42 | 247.63 | 292.28 | 282.26 |
| Net worth | 26.10 | 26.67 | 30.48 | 33.65 | 40.36 | 56.09 | 74.07 | 94.47 | 121.07 | 154.60 | 180.70 | 219.39 | 258.60 | 303.25 | 293.23 |
| Gross fixed asset | 40.51 | 50.23 | 57.34 | 59.28 | 63.30 | 61.13 | 68.63 | 83.45 | 146.84 | 149.64 | 152.25 | ||||
| Net fixed asset | 32.32 | 39.80 | 44.78 | 42.82 | 42.65 | 41.54 | 48.07 | 53.33 | 93.36 | 92.10 | 88.77 | ||||
| Market cap | 41.31 | 28.10 | 12.84 | 26.19 | 67.88 | 83.93 | 162.38 | 394.59 | 1’221.25 | 1’139.50 | 1’024.64 | 968.13 | 745.96 | 305.78 | 392.23 |
| CAPEX | 4.03 | 8.47 | 9.60 | 10.57 | 33.59 | 10.79 | 7.91 | 6.85 | 69.83 | 143.47 | 39.57 | ||||
| Outstanding shares | 5’851’520.00 | 7’314’400.00 | 10’971’600.00 | 10’971’600.00 | 21’943’200.00 | 21’943’200.00 | 21’943’200.00 | 21’943’200.00 | 21’943’200.00 | 21’943’200.00 | 21’943’200.00 | ||||
| Low price | 42.55 | 86.00 | 89.95 | 143.15 | 328.35 | 330.00 | 391.00 | 389.30 | 266.95 | 116.80 | 130.85 | ||||
| High price | 159.90 | 155.00 | 226.90 | 379.75 | 834.80 | 635.00 | 567.95 | 512.00 | 466.75 | 372.90 | 203.40 | ||||
| Total shareholders | 1’537.00 | 1’905.00 | 2’833.00 | 3’555.00 | 14’764.00 | 19’007.00 | 21’653.00 | 21’573.00 | 21’108.00 | 21’342.00 | 35’247.00 | ||||
| Disputed taxes | 1.06 | 1.06 | 1.52 | 1.56 | 1.80 | 2.87 | 3.30 | 2.44 | 1.86 | 1.37 | 1.36 | ||||
| CFO | 9.58 | 16.73 | 18.79 | 40.66 | 30.71 | 35.79 | 10.86 | 72.30 | 26.11 | 34.55 | 57.40 | 52.09 | |||
| Director remuneration | 1.79 | 1.41 | 1.74 | 2.17 | 2.51 | 2.88 | 2.95 | 3.21 | 3.76 | 1.98 | |||||
| Auditor remuneration | 0.07 | 0.09 | 0.10 | 0.12 | 0.12 | 0.17 | 0.15 | 0.18 | 0.06 | 0.07 | 0.07 | 0.06 | |||
| Employees | 951.00 | 919.00 | 808.00 | 868.00 | 927.00 | 993.00 | 809.00 | ||||||||
| Median employee salary | 116’808.00 | 142’836.00 | 166’416.00 | 179’712.00 | 192’072.00 | 202’680.00 | 171’089.00 |
Disclosure: Invested (position size here)
Latest management interaction with CNBC Awaaz
Disclosure: Invested (position size here)
Atul Auto Limited has announced the sales figures for the month of September 2021. The company has sold 1876 units during September 2021, as against 1633 units during September 2020. The September 2021 sales volume increased 14.88% YoY.
The company has reported sales volume of 6331 units during the period April to September 2021 registering a YoY growth of 11.82%, as against 5662 units during the period April to September 2020.
It is important to look at auto sales in comparison with someone like bajaj. Atul is actually not doing too badly considering Bajaj is market leader and accrues the benefits of that.
Understanding the ‘Disruption’ in 3 Wheeler Market
The current 3 wheeler EV, which is powered by lead acid batteries, is not right alternative for conventional vehicles. The lithium ion battery EV will be right alternative to the conventional vehicle.
There are lithium ion EV 3 wheeler players in market right now, even Atul has a few experiments going on. EV powered with lithium ion battery is still expensive. Expect in a few years when product is proved in market and availability of financers is there then can expect some great volumes from the EV segment.
Believe EV is a virgin market. There is no genuine comparison on competition. Not many known auto manufacturers who have ventured into EV. New entrants making few vehicles is one thing, but continuously producing quality vehicles is another thing. Mahindra, Piaggio, Bajaj, TVS, Atul are seasoned players in conventional 3 wheelers and they have higher chance to do better in EV segment vs newer players.
Also, Auto drivers not educated to the shift to EVs yet.
More importantly, in current environment, there is shift from diesel to alternate fuels – CNG/LPG/Petro. Diesel demand will keep lowering from current levels and there will be a shift from diesel to alternate fuels in urban and semi-urban areas. In rural areas diesel demand will still be there for next few years.
There are lot many excitements and announcements by government on EV, but India is yet to get prepared for the adjustments and reality on the road. There will be gradual growth for EV in Indian context. But until then diesel is being discouraged and alternate fuels like CNG will fill up that demand. Question is how fast? Depends on CNG network. Lots of states yet to set CNG infrastructure in rural and deeper areas.
Acquisition of 70% stake of Khushbu Auto (NBFC) by Atul Atul Auto for ~45 Cr is something that requires further investigation. Why?
Although this is not a huge amount for the company, this 70% stake was owned by Promoters / Promoters relatives / Mr Kedia (see below). So, I want to investigate if this transaction is done on arms lenght basis or not?
Now why its difficult to understand this transaction is because of the preference shares issued to the erstwhile promoters of Khushbu Auto (for 70% stake)
So, does it mean that this is a cashless transaction? Atul Auto is not paying 45 Cr in cash , rather issuing preference shares for 70% stake that’s equivalent to 45 Cr and will be paid after five years? I was not able to get clarity if I this is the right way to look at this deal.
By the way, when Khushbu Auto was owned by Atul Auto (30% stake) and Promoter related Parties (70%), why was this deal required at all? They were controlling the NBFC the way they wanted as they were the complete owners.
Khushbu Auto is well capitalized based on its balance sheet (below), but still no bank lends it without Atul Auto guarantee (see below). Can it be the case banks get more comfort to lend to Khushbu if Atul Auto has complete ownership? I am not sure, sorry, I have many curious questions but no answers. Please write back if you have more insights:
Khushboo Balance Sheet
I don’t think this understanding is correct, the shareholders of Khusbu finance have been paid out in cash (and not in the form of any preference shares). This is also disclosed in the related party transaction in H1FY22. Manju Vijay Kedia held 17%, Khusbu finance was valued at 63.67 cr. so the 17% should be 10.82 cr. which was the amount paid out in H1FY22.
This is also clearly mentioned in the earlier press release that payment will be made in cash.
Now coming to valuations of Khusbu finance, lets first understand their financial history (compiled from annual reports).
FY17: Invested 6.82 cr. (cumulative: 7.81 cr.); stake brought down to 30% from 49.91%; Khusbu raised 25.8 cr. (3 cr. pref + 22.8 cr. rights issue); disbursed loans of 23.34 cr (1’572 customers); AUM: 32.99 cr.; PAT: 1.77 cr.
FY18: Invested 5.4 cr. through rights issue (cumulative: 13.21 cr., 30% stake); disbursed loans of 100.44 cr. (6’050 customers); AUM: 114.7 cr.; PAT: 8.61 cr.
FY19: disbursed loans of 98.97 cr. (6’592 customers); AUM: 139.8 cr., PAT: 7.64 cr.
FY20: disbursed loans of 91.47 cr. (5’090 customers); Networth: 63.66 cr.; AUM: 146.86 cr., PAT: 3.2 cr. ROE: 5%
FY21: disbursed loans of 64.47 cr. (2’798 customers); Networth: 68.96 cr.; AUM: 152.93 cr., PAT: 5.29 cr. ROE: 7.7%
In FY17-21, company disbursed cumulative loans of ~379 cr. and recorded cumulative PAT of 26.5 cr. Atul auto has invested 13.21 cr. cumulatively for 30% stake + 44.57 cr. for remainder 70% stake ~ 58 cr. FY21 reported networth of Khusbu is 68.96 cr., so the valuations are not out of whack. Now we can comment on the very low ROE made by the company. This is probably more of a function of overcapitalization of the NBFC (d/e of 1x in FY21, 1.09x in FY20). If this d/e was 3-4x (in-line with other vehicle financiers), ROE would have been >15%.
Valuations were appropriate, being complete owners means alignment of interest. Why should a minority shareholder not benefit from 100% of operations of Khusbu Finance when its being managed by the same team as Atul auto.
Hope this clarifies my thought process.
Disclosure: Invested (position size here)
Thanks Harsh, very insightful. This clears lot of questions, except one.
If entire deal is settled in cash, what’s the purpose of Participatry Preference Shares (PPS) that are issued to erstwhile promoters for 70% stake?
Appreciate if you can answer this question.
I don’t think PPS were ever issued to promoters of Khusbu finance. Here is the exact excerpt from the annual report.
What this (probably) means is after Atul auto buys 70% remaining shares of KAFL, they might infuse further capital into KAFL. The requirement of this further capital is not at all clear to me, maybe they are facing issues on the asset side. Management hasn’t been conducting concalls, so we need to wait for their annual report.
interesting update in Q3FY22 results:
Company has a subsidiary called Atul Greentech Private Ltd which is into - "manufacturing battery packs, battery management system, battery charger, tools, equipment, fittings, raw material etc. for the purpose of electric vehicles of Atul Auto Limited"
In this qtr results, scope of business for Atul Greentech Private Ltd has increased to - "manufacture, assemble, and sale of electric three wheelers"
There will also be an infusion of Rs 15 Crores into this subsidiary by Vijay Kedia.
Although the infusion of money is a good confidence booster for growth in coming years in the EV business, shareholders’ stake in the story is being diluted. Further explanation should be given my management on this move.
So what changes? Atul is already selling their e 3W. Management has indicated 10% of their total sales come from ev. earlier they were manufacturing under Atul Auto and now under Atul Greentech.
Company is not selling lithium ion ev yet. Only lead acid battery.
My mistake. Money will be raised in atul green.
