Atul Auto gets a foothold in the three - wheeler market

Atul Auto Ltd, the relatively little-known Gujarat-based maker of three-wheeled passenger and goods carriers, has seen a small gain in marketshare in a segment that has bigger and more established rivals such as Bajaj Auto Ltd, Piaggio Vehicles Pvt. Ltd and Mahindra and Mahindra Ltd.

The advance comes amid overall three-wheeler sales staying almost unchanged in the first 10 months of fiscal 2011-12 as high interest rates have dissuaded buyers from purchasing new vehicles. Sales have contracted 0.44% to 428,733 units from the year earlier.

Atul Auto’s marketshare went up to 5.06% from 3.55% as sales rose to 21,673 units from 15,628 units, according to data from the Society of Indian Automobile Manufacturers, or Siam.

The Rajkot-based auto maker, credited with having pioneered motorized rural transport in Gujarat, has thus far been confined to its home state and neighbouring Rajasthan. It’s now looking at establishing a national presence.

Sales have held up because banks and other auto loan providers haven’t been dissuaded by the brand name not being a widely known one, thus reposing confidence in the Atul Auto vehicles locally and overseas, especially the Gem, said J.J. Chandra, chairman and managing director.

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“We have been working on a major market expansion plan since last year,” he said. The company’s key focus during this exercise will be the domestic market, he added. It currently exports vehicles to Kenya and Bangladesh.

Atul Auto has three models— Shakti, Smart and Gem, the last of which is a high-volume product. The recently launched Smart, an upgraded version of Shakti, will be the first Atul Auto product to be introduced in states such as Tamil Nadu and Madhya Pradesh. The company is in the process of doubling its capacity to 48,000 units per year with an investment of Rs. 8-10 crore. It’s also working on two new models—a sub-1-tonne four-wheeler that will be pitted against Tata Motors Ltd’s best-selling Ace and a small three-wheeler, said Paul Zachariah, vice-president, marketing.

Both the models will be ready for launch in a year’s time, Zachariah said. Atul Auto will continue to target tier two and three towns, he said. “We see huge untapped potential in these regions. We haven’t been able to address quite a few of these markets owing to capacity constraints.”

D. Ashakiran Kumar, analyst at brokerage First Research, has a buy rating on the stock. Kumar expects Atul Auto’s net profit to rise to Rs. 180.6 crore in the next fiscal year from Rs. 144.64 crore in the current one and net sales to increase to Rs. 3,818 crore from Rs. 3,030.75 crore.

Atul Auto’s stocks closed at Rs. 117.05 a share on BSE on Wednesday, up 0.04%. The benchmark Sensex gained 353.84 points, or 1.98%, to clsoe at 18,202.41.