Speaking to CNBC-TV18, Deepak Jain from Anand Rathi - Automobile & Transportation,  said that almost 10% of the two-wheeler market may shift to Tata’s new Rs 1 lakh car. He said, “With a Rs 30,000 down payment, you can take a loan of around Rs 1 lakh and EMI works out to be around Rs 3,716 per month. With just Rs 3,700 per month on an EMI, I believe anybody can afford this product. As far as the shift is concerned, initial estimates is around 10% of the two-wheeler market can actually shift towards the small car.”

Excerpts from CNBC-TV18’s exclusive interview with Deepak Jain:

Q: What is your initial reading into the details that have come out on Nano?

A: I believe it is good product as far as specifications are concerned- 624cc, two-cylinder and the mileage, which it is promising of 20 Km/liter, could be a defining moment in terms of a price. It is priced at Rs 1 lakh and one look at the dealer margin and if we add the VAT the registration charge, the base model could workout to be Rs 1,30,000 lakh on road.

Q: Give us an idea of how you read this stock going ahead from here given the much-awaited launch and the kind of numbers it promises going ahead?   

A: If we look at the demand scenario, the kind of numbers it can do- if we look at the demand, the different segments which it is addressing- it is a second car market which people would eventually buy. Every year we sell around 13 lakh cars, it could alter the market, which is addressed by Alto and Maruti 800. Almost 1.5 million Altos and Maruti 800 cars are being sold every year and it can also address the secondhand car market, which we expect with this car can actually crash in terms of pricing. So I believe it addresses lot of segments and it can be a big demand puller.

Q: Do you think there would be a very conscious shift with the launch of this product from the two-wheelers space to an upgraded product choice by the consumers?

A: If we look at, who can buy this product? With a Rs 30,000 down payment, you can take a loan of around Rs 1 lakh and EMI works out to be around Rs 3,716 per month. With just Rs 3,700 per month on an EMI, I believe anybody can afford this product. As far as the shift is concerned, initial estimates is around 10% of the two-wheeler market can actually shift towards the small car.

Q: Also give us an idea of what kind of an impact do you think it may or may not have on the Maruti Suzuki’s stable?

A: As I told you, the main impact will be on Alto and Maruti 800 and we sell around 2.5 lakh Altos every year and around 80,000 Maruti 800 every year. The total ownership, if we look at Alto and Maruti 800, it is expected to be around 1.5 million or 15 lakh car owners. So I believe that could be an addressable market for this car which is already available.

Q: What's your call on the stock of Tata Motors at Rs 775?

A: Specifically, for this project, the company is aiming at around 15% Return On Capital Employed (ROCE). It means that Tata Motors should be able to make an EBITDA margin of at least 10.5% on this project, which I believe would take at least 2-3 years time. So it is not a short-term story - the stock may have seen some kind of an excitement, but the gains would accrue only on a long-term basis.