The stock which was languishing for the past couple of years due to the slowdown of automobile industries, has gained more than 100 per cent in the last one month. The scrip has moved from a low of Rs 8.7 level to touch a high of Rs 23.25. However, due to general bearish sentiment in the market, the scrip has fallen to Rs 17.10-level.

This provides investors with an excellent opportunity to enter the counter as analysts believe that this stock has significant upside potential even at current levels. The improving trends from the automobile industry and the completion of its expansion-cum-modernisation plan would see a much improved financial in the current fiscal.

For fiscal 1999, the company reported a net profit of Rs 2.35 crore on a turnover of Rs 67.16 crore. For thefirst quarter of the current fiscal, the company reported a 17.34 per cent growth in sales to Rs 18 crore on back of a revival in the commercial vehicles and tractors segment. The company's interest and depreciation costs have increased on account of the capacity upgradation and expansion. Despite this, the company improved its margins from 10.2 per cent and 10.4 per cent on back of increased demand and also due to upgradation of manufacturing facility.

The similar trend has continued in the month of July in which the sales were Rs 7.89 crore. The future seems to be bright as original equipment manufacturer (OEM) market showing signs of a pick up. The company would be able to leverage its strengths in the replacement market and the tractor segment.

Clutch Auto has completed its modernisation-cum-expansion at its manufacturing facilities in Faridabad, Harayana. The expansion drive which begun in 1995-96, involved a total outlay of Rs 18.59 crore. The company has plans to spend another Rs 7.85 crore in thecurrent fiscal for further upgradation of the in-house manufacturing, testing and development facilities. The company has decided to go in for a vertical integration to produce all critical inputs for clutch assembly. It has already launched lead-free asbestos clutch facings under the brand name of `Cockroach' with support from Raybestos Industries of Germany. The company with its modernisation drive would have a positive impact on the quality of its products. Quality edge is a must to survive the competition as Clutch Auto faces competition from various multinational companies such as Ceekay Daikin, Amalgamations group, Rane-Luk Clutches and Rico Auto.

Clutch Auto, which came out of BIFR in 1994, has since then consistently consolidated its position and at present has a market share of 40 per cent. Its forays into the tractor segment has started yielding results as during the last year it had roped in new clients like Mahindra & Mahindra and TAFE. Clutch Auto is also in talks with Telco for supplyingclutches for all Euro II engines for its light, medium and heavy commercial vehicles. Product approvals to this effect were obtained by the company from Telco on July 28.

This business alone would amount to an additional turnover of Rs 6-7 crore for the company in the current fiscal. The company has recently bagged a $3 million order from Eaton, US for supplying clutch discs and castings for heavy duty appliances.

With exports being the new thrust for the company, it would have presence in all the three segments -- OEM, replacement and exports. Clutch Auto holds a lot of promise as the revival in the automobile segment would translate into good replacement demand in which Clutch Auto is a major player.

The stock which was languishing below Rs 10 two months back is now doubled. But it still has a lot of upside potential and is expected to touch Rs 50-mark in six to one year period. The scrip is currently trading at a PE multiple of 6.4 times. The current market price is marginally lower than the bookvalue.