Stock of this smallcap commercial vehicle company has zoomed 50% in 6 days

Shares of Atul Auto were locked in the upper circuit of 10 per cent at Rs 570.40 on the BSE on Wednesday at 12:42 PM, amid heavy volumes, with only buyers being seen at the counter.

A combined 1.4 million equity shares, representing 5.5 per cent of total equity of Atul Auto, have so far changed hands on the NSE and BSE. There are pending buy orders for 200,000 shares on both the exchanges. The stock is trading at its highest level since January 2016.

In the past six trading days, the stock price of Atul Auto has zoomed 50 per cent as Kedia Securities acquired 1.65 per cent stake in the company through open market. In an exchange filing, Atul Auto said that Kedia Securities Private Limited has purchased 430,000 shares or 1.65 stakes in the company via open market.

Neeraj Jayantibhai Chandra & other promoter group had sold 460,000 shares or 1.77 per cent of their holding in Atul Auto via open market, the company added.

Meanwhile, the exchanges, on Wednesday, sought clarification from Atul Auto with reference to significant movement in price, in order to ensure that investors have latest relevant information about the company, and to inform the market so that the interest of the investors is safeguarded. The reply is awaited.

Thus far in the current calendar year 2023, the stock price of Atul Auto has more-than-doubled, appreciating 103 per cent, as compared to 6.9 per cent rise in the S&P BSE Sensex.

Atul Auto manufactures three wheelers (goods as well as passenger segments) under the Atul brand, and spares, components, and allied products. The company is an established player in the three-wheeler industry, commanding around 5 per cent of domestic market share and 3 per cent of overall market share.

It caters to demand for passenger, cargo, petrol, diesel, liquid petroleum gas, and electric vehicles. The distribution network is spread across India. However, the company operates only in the three-wheeler segment, exposing it to high segment concentration risk. Timely innovation, introduction of new products, in line with market needs, and revival of overall demand will be the driving factors for growth in sales.

For the June quarter (Q1-FY24), Atul Auto's consolidated loss widened to Rs 9.41 crore from Rs 3.65 crore in the year ago quarter, due to lower operational income. It had posted a net profit of Rs 3.34 crore in the March quarter. The company’s total revenue from operations declined 44 per cent year-on-year and 60 per cent quarter-on-quarter to Rs 59.65 crore.

Earlier this month, CRISIL Ratings revised its outlook on the long-term bank facilities of Atul Auto to 'Stable' from 'Negative', while reaffirming the rating at 'CRISIL BBB+'. The short-term rating has been reaffirmed at 'CRISIL A2'. The rating agency believes Atul Auto will continue to benefit from its established market presence, supported by a robust distribution network.

"The outlook revision factors in improved business performance of Atul Auto after Covid-19 led slowdown and further expected improvement in vehicle sales over the medium-term. However vehicle sale numbers remain low during the first quarter on account of delay in regulatory approval for its diesel engine vehicles and same has been resolved and expected healthy contribution from diesel vehicles is expected to improve overall vehicle sales numbers," CRISIL Ratings said in its rationale.