Atul Auto to invest Rs 200cr in 4-wheeler foray

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Stock of Atul Auto spurted over 8% on Monday after the company announced its plans to enter into the four-wheeler commercial vehicle segment and has already started scouting for land near Ahmedabad to set up a plant.

Vijay Kedia, director of the Rajkot-based auto company, in an exclusive interview, said, "the company had exposure only in the three-wheeler space. Hence, we are diversifying portfolio to high-growth businesses." 

Below is the verbatim transcript of her exclusive interview with CNBC-TV18's Ekta Batra and Reema Tendulkar. Also watch the accompanying video.

Q: Reports suggest that you are possibly looking to invest around Rs 200 crore into four-wheelers space, can you just give us an update on that?

A: Yes, we are scouting for land in Ahmedabad. The investment in this venture should be around Rs 200 crore.

Q: Can you just give us a rationale on why you are looking to diversify into four-wheeler space? What is the long-term plan of the company?

A: As of now, we had exposure only to three-wheelers. Hence, we wanted to go full scale and four-wheeler shows potential as far as future growth is concerned.

Q: And how are you planning to fund this Rs 200 crore?

A: The financial closure is undecided and it will take some time.

Q: Are you planning to collaborate with any foreign entity for this foray?

A: Maybe, we are considering that option, but I cannot reveal anything at this moment.

Q: Will it be a 50:50 joint venture? Have you spoken to anyone? How soon might you tie up on that front, and even on that land front?

A: Yes, within two months.

Q: And, what about the land?

A: Same as above, within two months. We are still searching.

Q: Reports suggest that you also might be interested in bidding for Scooters India? Could you just throw some light and could you care to confirm?

A: Yes, we are interested in taking Scooters India. Once we hear something from the government, we will proceed into this matter.

Q: What is the bid amount possibly for that 95.3% stake?

A: That is still unknown because we are yet to go for due diligence. We are waiting for the government's invitation.

Q: So, how much amount has been chalked out as a possible investment bid for Scooters India? Is there a limit that you are working with?

A: As of now, we have not decided on that front. First we will visit the plant, check out everything and carry forward with due diligence. Once these things are done, then we will decide how much money should be pumped out for this venture.

Q: Could you give us an update on the rights issue?

A: Yes, I think it is being approved by Securities Exchange Board of India (SEBI) which should be through within 45 days.

Q: And what is the total amount that you are looking to raise via the rights issue and also if you could tell us your debt, what does it currently stand at?

A: We are raising the rights issue at a minimal level of around Rs 4.5 crore.

Q: Any debt that you all have currently on the books?

A: It is minimal. The company has around Rs 8-10 crore of debt as of March 30, 2011. We are on the verge of becoming debt free.

Q: Also, few reports suggest that you are looking to foray into agriculture machines business and you are doing this via an acquisition of a Gujarat based company, is that true?

A: Yes. We are discussing acquisition opportunities with a company that has exposure in agriculture and construction equipment

Q: The timeline of this and how much are you willing to put up for this as an investment?

A: It's undecided whether it would be money or equity. This should also take two months.

Q: You have a lot of plans, you want to enter into four-wheelers, possibly bid for Scooters India, acquire business in Gujarat etc, do you think you are rights issue will suffice for the plans going forward, or do you expect increase in debt funding? How do you expect or what are you chalking out for the near future?

A: No. We are needy and greedy because we are a small company in the automobile front. As far as the rights issue is concerned, it is a very small rights issue because it was declared last year. It has got nothing to do with our future acquisitions. For that we have to raise wage capital and borrow funds or something that we will determine later.