Atul Auto to boost revenue with new product portfolio

Three-wheeler specialist Atul Auto, which reported its first loss after 45 quarters in June, is looking to beat the slump caused by the pandemic and shore up its sales numbers with its new product portfolio - and an upcoming plant near Ahmedabad.
The company, which was largely dependent on the sale of its diesel-powered three-wheelers, is betting that the new petrol, CNG and LPG-powered vehicles in its fleet will find a larger set of buyers. Meanwhile, its new plant that becomes operational next year will double its annual production capacity to 120,000 units and prevent any capacity constraints in the mid-term.

The company is also working on lithium-ion battery-powered electric three-wheelers, which could hit the market as early as the second quarter of FY22, said Jitendra Adhia, President (Finance), Atul Auto.

However, the company's complete dependence on three-wheelers ties its fortunes to the business cycles of the segment - unlike at its larger peers Bajaj Auto, TVS Motor, Piaggio and Mahindra and Mahindra. These companies have diversified portfolios and markets to hedge against downturns.

Adhia said that the company cannot justify diversification into other segments until it achieves sufficient volumes in three-wheelers first.

“Our (production) capacity is about 5% of the total industry volume. Unless we reach decent numbers, it would not be right for us to diversify,” he told ET.

Atul Auto sold 44,082 vehicles in FY20 against total industry sales of about 1.1 million units, including exports. Bajaj Auto is the largest three-wheeler maker in the country.

The Rajkot-based company expects to achieve better sales as it expands its portfolio to include more “alternative fuel” vehicles, as Adhia calls them, which include fuels other than diesel. Atul Auto has a market share of 12-15% in the diesel space, which has been its strength traditionally but accounts for a small segment of the overall market, he said.

The company is looking to expand its sales footprint which presently stands at about 220 primary and 120 secondary outlets across India. It is also looking to expand sales to over 30 countries from 16 at present, with a target of exports up to 25% of total sales from 7-8% at present.

“We expect goods carrying three-wheeler sales to decline 20-25% on-year in FY21 and then expected to recover by 30-35% in FY22,” Hetal Gandhi, Director, CRISIL Research recently told ET. The sales projections for three-wheeler passenger carriers are lower, given that people are apprehensive of using public transportation during the pandemic.

The shares of Atul Auto declined by 3.06% to close at Rs 182.45 on the BSE on Wednesday. It has reported a loss of Rs 5 crore on revenue of Rs 205 crore during April-December of FY21.