Atul Auto soars 14%; board issues 5 mn warrants to ace investor Vijay Kedia

The board approved issuance of up to 5.81 mn convertible warrants at Rs 198 per share to promoters and non-promoters including ace investor Vijay Kedia

Shares of Atul Auto soared 14 per cent to Rs 244.85 on the BSE in Monday’s intra-day trade after the company's board approved a preferential issue of Rs 115 crore worth of warrants to promoters and non-promoters of the company, including investor Vijay Kishanlal Kedia.

“The board approved to issue up to 5.81 million warrants at Rs 198 per share each convertible into one equity share of the company within a maximum period of 18 months from date of allotment. The company will allot 5.05 million warrants to Vijay Kishanlal Kedia, and a total 757,575 warrant to promoters, Khushbu Auto Private Limited (656,565 warrants) and Jayantibhai Jagjivanbhai Chandra (101,010 warrants),” Atul Auto said in an exchange filing.

As on June 30, 2022, Kedia Securities Private Limited held 1.47 per cent stake in Atul Auto, the shareholding pattern data shows.

Atul Auto is a prominent 3-W manufacturer based out of Gujarat with broad-based presence across segments and fuel types. The company has production capacity of 1.2 lakh units per annual with FY22 sales volume pegged at around 16,000 units i.e. significantly underutilised.

With a market capitalisation of Rs 470 crore and 22 million shares outstanding, this is a significant capital raise resulting in 25 per cent plus dilution. With marquee investor again coming in with a substantial stake (around 18 per cent stake), it remains to be seen as to what are the long term growth opportunities at the company as its base business is on a slower than anticipated recovery path, ICICI Securities said in a note.

One possibility could be contract manufacturing for an upcoming electric 3-W player domestically. On the operational front, a key monitorable in the near term is launch of its electric auto, the brokerage firm said.

Analysts at Anand Rathi Share and Stock Brokers expects strong volume growth in the near to medium term as most Covid-related tailwinds are behind. Schools, colleges and offices are expected to operate normally and drive demand for 3Ws. Accordingly, the brokerage firm expects strong 73 per cent growth in FY23 and 35 per cent in FY24.