Atul Auto Limited

Stock Opportunities
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Don't call it a car
Business Standard / New DelhiJanuary 5, 2012, 0:05 IST

That's exactly what Atul Auto 4-wheeler plans were - Consider it a 3-wheeler with 1 more wheel.The RE60's arrival means Atul Auto's plans are 2-3 years behind the first-mover! This can work bothways...should be interesting to watch developments here.
The RE60âs rivals will be the three-wheeler passenger carriers made by Bajaj Auto, Piaggio, Mahindra & Mahindra and Atul Auto, as well as the Tata Magic. Since Bajaj Auto leads the market with a share of 80 per cent, it could eat into the companyâs three-wheeler sales. But the company is hopeful that it will also open a new category of enclosed, small, passenger carriers. In the automobile market, most companies now like to have more than one product in each segment. It gives the consumer more choice. So, the RE60 should help Bajaj Auto to expand its market share. It will be a while before others in the business catch up with it.
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Bajaj RE60a Is It A car?

This Forbes article seems to make the positioning/platform direction very clear.

Will the RE 60 become a goods carrier? In the sense, letas say a light commercial vehicle? Nope. Mr. Bajaj said the company doesnat want to get into moving goods because it is not what they do. Bajaj is happy moving people around. This was backed by an interesting logic shared by the man that is worth mentioning. He said Tata Motors is a truck company. So when a big truck company makes a little truck, people are happy to buy it. aI am not sure if people want a want a small car from a truck company.a I donat know if that will go down too well!

Read more:http://forbesindia.com/article/auto-expo-2012/bajaj-re60-is-it-a-car/31900/1#ixzz1ifte5Uhj

RE60 is aimed at passenger segment only, not Cargo. And Atul Auto’s 4 wheeler positioning may be exactly the reverse - positioned for Cargo, not passenger vehicles??

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Hi,

Happy to share with you Atul Auto Management Q&A, Jan 13, 2012

Thanks Ayush for the extensive discussion that throws more light on a company that looks like continuing to do very well in the near-to-medium term.

Guys, its good to pick up on ValuePickr’s collaborative model. Anyone of you can take the lead like Ayush on collating questions and putting it to Management. ValuePickr members will add value to your efforts, help refine and probe deeper.

What we have on hand - is a pretty transparent look at Atul Auto’s business strengths and challenges ahead. Its another example of great collaborative effort!

Please carry forward the discussions.

Rgds

Donald

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Excerpt from the Management Q&A. A point I think we should ponder some more - not sure everyone has latched on…what do you read into this?

11). RIGHTS ISSUE. 1 EQUITY SHARE FOR EVERY 4 EQUITY SHARES HELD. 14,62,880 EQUITY SHARES AT RS.30 FOR RS. 4.39 CRS. ONE SHARE FOR EVERY 4 SHARES HELD. RECORD DATE 15THSEP, 2011.

As of Sep 30, 2011 the company had negligible debts of 3.75 Cr coupled with a healthy Current Liabilities (Payables) position of 32.25 Cr! Kindly explain the rationale for the rights issue.

We had applied for the rights issue in June 2010 and expected to get clearances in a couple of months. But it took more than a year!. The cash flows and debt position were very different then from what it looks now. We had almost 15 Crores in debt as on 30 Sep 2010!

So after getting the approval as most of the work had already been done and it was a small issue, we decided to go ahead. In a way it was also to reward the small shareholders.

This is a substantial 20% dilution for just Rs. 4 Cr (which the company did not need at the time of offer). This is a very expensive deal for any company. You could have chosen to defer/scrap the rights issue. Kindly comment

From a strict financial standpoint, you are right. Would we have gone for a rights issue in the current financial situation, at these terms? Absolutely not!

However you may like to see it in the right context. When we applied for the rights issue in June 2010, it made sense. The company had debts of ~15 Cr, we were thinking of raising money for Capital Expenditure. The prevailing share price of the company was ~40-50, and we offered the rights issue at a discounted price of Rs.30. You canât find much fault with this, right?

Now when the approvals came a year late, one point of view was to scrap the rights issue. The other viewpoint that also emerged was that it is good for small shareholders, especially as the share price had appreciated a lot since then. That the company should keep in mind small shareholders who have stayed with the company for several years. We did sample surveys with small shareholders in Ahmedabad. The results seemed to indicate that they welcomed the rights issue.

The company decided to go ahead with this option.

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1). However way I look at this, I cant see Management justifying diluting 20% of the company for just 4 Crs. They spent 8-9 crores in 2 windmills!!

2). On the other hand, by all accounts there does not seem to be malafide intent! And sometime that’s much more important than the insignificance of the action.

3). Instances of dilutions of 1:1, 1:2, or 3:5 abound. Thecamlin fine chem rights issue at Rs. 15.75 and 3:5 ratio at CMP 105 - could be seen as malafide intent? Management granting themselves a much cheaper way to accumulate higher stakes in the company!

4). We will probably see Management stake going up by 1% or so once Qtr3 sharholding is made public…so not so material?

5). But my real takeway is a Question mark on Management BW?? Poor Capital Allocations…9 Crs in Windmills…but 20% of the company given away for only 4 Crs!

In the near and mid-term Atul Auto looks set to do very well, and the stock is undervalued, so I will take advantage of it…and more as it corrects more with the market…but lloks like it will stay in the Short Term portfolio…

Invite views from more experienced participants…who have churned many stones…and probably seen through, evaluated many many more Managements!

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Why it was raised in Q&A with Management “This is a substantial 20% dilution for just Rs. 4 Cr…” on right issue matter ?

Did not management subscribed to Right Issue?

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I mean if every one had right to participate in this issue equally … then before the issue and after the issue % ownership of every share holder will remain same. Why it isfavorto small share holder orgenerosityby majority shareholders ?

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Read a report on the Auto sector from Alchemy…

In the 3 wheeler goods carrier space, while Atul Auto sales YTD increased about 50%, Bajaj Auto sales increased more than 130%. Overall segment grew 17%.

The month of December saw a sales degrowth of 5.2% year on year, but Atul Auto showed the highest growth 57.7%.

Atul Auto sales in 9 months 9217 as compared to 6179. Market share increased from 8% to 13%.

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From India Infoline: Donald any idea why this was shared with them rather putting it on BSE..

Three wheelers commercial vehicles always play very important role in small and medium-sized enterprise & local business efficiency.

Atul Auto Ltd. has recorded another spectacular performance in the third quarter of FY11-12. Atul Auto, one of the key player in three wheeler segment, a leader in front engine Diesel & CNG 3 wheeler has ended the third quarter with substantial increase in vehicle sales as compared to the same period last year.

Despite worries in the form of inflation, rising interest rates and input costs, Atul Auto Ltd. are confident of ending the financial year with a strong growth in vehicle sales. Mr. Vijay Kedia Director of the company said that they had predicted a sales growth of 40 % year on year which are almost on track despite the difficult situation.Sales of 3rd quarter for FY 11-12 was 7173 units as compared to 4813 vehicles in the corresponding quarter last financial year which shows 49% growth in Net sales.

Our sales for 9 months (April to December 2011) is 19548 units against 13475 units in corresponding 9 months ( April to December 2010) in the last financial year, he added.

Three wheelers commercial vehicles always play very important role in small and medium-sized enterprise & local business efficiency, and Atul Auto has contributed a lot through providing innovative and commercially viable features in passenger & commercial segment. The production and sales of Atul Autoâs vehicles has been on constant high including their exports.

http://www.indiainfoline.com/Markets/News/Atul-Auto-Sales-jump-in-3-rd-Quarter/5336639616
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Dr. Hitesh,

Have you looked at result? EPS growth is not good.

There is one exceptional iteam. Can any body eleborate it, what it could be!!

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Hi Siddharth,

As per my interaction, the exceptional item is the provision fordiminution in the value of investment.

Ayush

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Atul Auto Ltd has informed BSE that the Company has conferred with “Most Promising SME in Auto & Engineering” in CNBC-TV18-ICICI Bank Emerging India Awards 2012, powered by CRISIL.

http://www.bseindia.com/stockinfo/anndet_new.aspx?newsid={60557C00-5316-4BC4-847E-A34C0606216D}

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Performance of the Company during financial year 2011-2012|02/04/12 13:30

Atul Autohas informed BSE that the Company has recorded total sales of 27,000 vehicles during financial year 2011-2012 as compared to 19,404 vehicles during previous fiscal 2010-2011. Whereas sales for January-March 2012 quarter recorded at 7457 vehicles as compared to 5927 vehicles during January-March 2011 quarter.

That’s a 39%+ growth in Sales over last year. Assuming avg realisations maintained, the company has managed a very decent 40% growth for the year. Walking the Talk!

We should review the prospects for 2013, give that a fresh look.

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**Atul auto seems to be undervalued based on trailing 3 quarters and expected encouraging q4. **

I think that at cmp of around 115 it offers good scope of appreciation.

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How does Atul auto passes the filter test of size of opportunity ?

Also how about the looming competition from Tata Motors and M& M,Piaggio all 3 top quality motor cos.

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JK Bank inks pact with ATUL AUTO:

http://www.greaterkashmir.com/news/2012/Apr/7/jk-bank-inks-pact-with-atul-auto-31.asp

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Looks an excellent opportunity to me- Bothfor Short Term as well as Long Term.

http://fundoopupil.blogspot.in/2012/04/short-term-stock-pick-531795.html

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Atul Auto plans to double production to 48000 vehicles per annum.

http://www.myiris.com/newsCentre/storyShow.php?fileR=20120425105712043&dir=2012/04/25

Interestingly this is all supposed to be from the de-bottlenecking exercise.

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Hi,

Personally I do not like to travel inDieselauto (Piaggio Ape Model, which is very common in Kerala). Atul looks similar type. I had a short check with many people and no one really liked Ape kind of model for travel… wouldpreferas load carriers… Bajaj has a model which is more comfortable to travel… but is not a HIT so far… not sure what are the flaws…(Bajaj model). So if a better comfortable cost effective model evolves that would be a sure hit… Does anyone know if ATUL Management is aware of such customer bias? If needed can they launch such a vehicle… that would be sure hit and sales should go over the roof… I guess…
(now people are using it since they dont have much option in kerela… as most of the autos are PiaggioDiesel models and ATUL started showing up as well)…

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Hi Raju,

Is it only in recent times that you have spotted Atul autos? If yes, its a very good update for the co.