Atul Auto currently has a small share of four percent in the segments it operates in but it has lined up plans to boost itself to be a bigger player in the light commercial vehicle segment. The company has set a target of clocking a Rs 1,000 crore in turnover by 2015-16, a five-fold jump over its turnover of Rs 200 crore in 2010-11.
A key role will be played by its new light four-wheeler commercial vehicle which is set to debut around 18 months after acquiring the land for the project. Atul Auto has lined up a Rs 150 crore investment in a new plant which will come up in or around Ahmedabad.
The company’s plan of entering the four-wheeler project has got delayed due to the hurdles in acquiring real estate. The original plan was to complete the land acquisition by July 2011. Atul Auto is looking at a plot of 50-100 acres. Initially, the production capacity will be 30,000 units annually. That’s more than the current production capacity of its three-wheelers.
Atul Auto sees strong growth for light four-wheeled commercial vehicles sustaining over the next decade. In an exclusive interview with Autocar Professional, Vijay Kedia, director, Atul Auto, says: “As per our survey, this sector is likely to grow 15 percent, year-on-year, for the next 10 years”. He adds that Atul Auto’s operations in the four-wheeler CV space will be limited only to light trucks and it has no plan of venturing further into medium CVs.
Atul Auto, which clocked sales of 19,398 vehicles in 2010-11, is looking at 100 percent capacity utilisation during this year. An ambitious growth target is set for the coming years. “Our cumulative annual growth rate should be 40 percent for the next five years,” adds Kedia. This growth rate is expected to ride on some major expansion by the company.
According to Kedia, the company’s three-wheeler annual production capacity of 24,000 will be doubled to 48,000 this year. “With some additional effort, this figure can even go up to 54,000,” says Kedia. The additional capacity is likely to be used up by 2013-14. Some new models are being lined up for launch in the January-March ’12 quarter. Some of these will be launched with better fuel efficiency figures than its current lot of products. The company says that work on technology to improve fuel efficiency is in progress at its Pune R&D centre.
Atul Auto is also planning to enter the agriculture machines business next and is looking at acquiring a Gujarat-based company.
New focus on exports
The company’s target of touching the Rs 1,000 crore mark will also ride on its new focus on exports. A planned assembly plant in Bangladesh will play an important role. This facility will be commissioned “after December 2011” and will have an annual capacity to assemble 12,000 units.
The company is bullish about reaching peak production capacity in Bangladesh in a year. At 12,000 units annually, it expects business of Rs 150 crore from its Bangladesh operations. It had stopped exports last year to meet growing demand from its domestic dealers. “Going forward, the strategy is to set up assembly units abroad rather than pressurise domestic production to meet exports. Exports will be a major thrust for us from 2012 onwards,” says Kedia.
After Bangladesh, Atul Auto’s focus is on setting up a base in Sri Lanka. Unlike in Bangladesh, where it has a technology alliance with its partner who has invested in the assembly infrastructure, this will be a joint venture model in Sri Lanka. Talks are in an “advanced stage” now with the Sri Lankan partner and a final decision is likely to be taken within six months. “The Sri Lankan venture will be followed by another in Africa,” reveals Kedia.
Synergies with Scooters India
After the central government announced its decision to divest its stake in Scooters India – manufacturer of the Vikram range of three-wheelers – Atul Auto saw the government-owned firm as a good fit for its business and now aims to acquire it. The company expects the acquisition process to take around four months.
Scooters India, which currently operates at a production level of 12,000 vehicles per annum, manufactures only front- engined vehicles. And that is where Atul Auto sees the first and the strongest synergy between the two companies. Currently, Atul Auto is the only company which manufactures front and rear-engined vehicles.
“We have upgraded our front engine technology to a great extent in last few years. After taking over Scooters India, we will have a 100 percent market share of front-engined vehicles.” says Kedia confidently.