The 21% Conviction: Kedia’s Ultimate ‘SMILE’ Play?
When it comes to the super investors of India, few names carry as much weight as Vijay Kedia. Known for his “SMILE” (Small in size, Medium in experience, Large in aspiration, Extra-large in market potential) philosophy, Kedia is known to spot value in companies undergoing painful but necessary transitions. His involvement with Atul Auto is not a recent buy; it is a decade-long exercise in high-conviction value investing.
He has held the company in his portfolio at least since December 2015. He might have bought it earlier, but that is the oldest data available on trendlyne.com. He currently holds 18.2% stake in the company under his individual portfolio and another 2.7% stake through his holding company, Kedia Securities Private Limited.
Now, to the casual observer, Atul Auto might look like a relic of an older era of Indian manufacturing, specialized in the rugged, noisy diesel three-wheelers that navigate the unpaved arteries of rural India. However, Kedia’s conviction in the stock suggests that Atul Auto is probably an “ugly duckling” with the potential to become a swan.
His conviction and loyalty to the stock have for over a decade been a plus in the books of smart investors. But Kedia’s bet isn’t just on a balance sheet; it’s on a family-led engineering culture that has survived every major economic cycle since the 1970s.
While global giants like Tesla or BYD focus on the top 1% of the urban elite, Atul Auto is betting on the person delivering milk, vegetables, and Amazon packages to the millions of households in Tier-3 and Tier-4 towns.
Structural Synergy: The AGPL Merger and the Race for Last-Mile Dominance
For several years, Atul Auto’s corporate structure was bifurcated in a way that often confused institutional analysts. The core business, Internal Combustion Engine (ICE) vehicles, resided in the parent company, while the futuristic, high-growth EV experiments were parked in a subsidiary known as Atul Greentech Private Limited (AGPL).
In mid-January 2026, the board of directors made a decisive move to end this situation. Through a strategic slump sale, the parent company, Atul Auto, acquired the L5 Electric Three-Wheeler business from AGPL for approximately Rs 35 cr.
This restructuring has been taken as a green flag by the markets for two distinct reasons.
First, it enables Sales Synergy. Previously, the company had two different sales channels and entities trying to sell to the same fleet operators. By bringing the L5 EV business under the parent umbrella, a single salesperson can now offer a fleet owner a mix of ICE and EV vehicles, depending on their infrastructure readiness.
Second, it provides Balance Sheet clarity. By consolidating the high-expenditure R&D of the EV segment with the cash-flow-heavy ICE segment, Atul Auto can better fund its transition without the friction of high interest loans or complex subsidiary accounting. This move signals that the company is no longer testing the waters with EVs; but it is possibly diving in headfirst.
Diesel Heritage, Electric Future: Bridging the Rural-Urban Divide
The heart of Atul Auto’s story lies in its ability to adapt its engineering prowess. For decades, the brand was synonymous with the vibrator diesel engine, a machine known more for its torque and durability than its refinement. In the underbelly of India, where roads are more a suggestion than a reality, the Atul brand earned a reputation for being unbreakable.
The transition to the L5 electric segment is not merely a change of fuel; it is a fundamental redesign of the vehicle’s DNA. The L5 category (essentially heavy-duty three-wheelers) is where the real work of the Indian economy happens. Unlike the lighter L3 rickshaws seen in Delhi or Mumbai, L5 vehicles require sophisticated battery management systems (BMS) and high-torque motors to carry payloads of up to 500-700kg.
Atul Auto has focused heavily on localizing its powertrain. While many EV startups in India have essentially been re-badgers of Chinese components, Atul has leveraged its Rajkot engineering roots to build chassis and suspension systems that can handle Indian over-loading and heat. The goal is to ensure that the silent electric motor retains the same ruggedness that rural customers associated with their old diesel engines.
The Rural Moat: Battle for the Last Mile
The landscape of 2026 is vastly different from that of five years ago. Atul Auto is no longer just competing with local regional players; it is in a direct collision course with Bajaj Auto and Mahindra & Mahindra.
However, Atul possesses a unique rural moat. Its distribution network is deeply entrenched in markets where the larger players often lack the same level of granular penetration. In many rural districts, the local Atul Auto dealer isn’t just a seller but also a primary service provider and financier for the local economy.
Management has set an ambitious target of 30% volume growth for the 2026-2027 fiscal year. Achieving this will require a delicate balancing act: maintaining their dominance in the ICE segment, which still pays the bills, while aggressively capturing market share in the EV cargo segment. The cargo version of the EV three-wheeler is particularly lucrative, as e-commerce giants and FMCG companies are under increasing pressure to green their supply chains.
The Price of Transformation: Decoding the Financials
To understand the scale of the transition, one must look at the hard numbers. With a market cap of Rs 1,388 cr as on 19th February 2026, the company has 2 manufacturing units in Rajkot and Ahmedabad with an installed capacity to manufacture 60,000 vehicleseach. Over the past few years, it has doubled its production capacity through Greenfield expansion at its Ahmedabad unit.
Looking at the financials, the sales of the company grew at a small 3% CAGR from Rs 625 cr in FY20 to Rs 723 in FY25. In the first 3 quarters of FY26 (Q3FY26, ending December 2025), the company has logged sales of Rs 584 cr.
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) was Rs 71 cr in FY20 and Rs 52 cr in FY25, logging a negative growth. For Q3FY26, the EBITDA recorded was Rs 57 cr.
Regarding net profits, the company has seen a roller coaster ride in the last 5 years, with signs of a turnaround after FY23.
| FY | FY20 | FY21 | FY22 | FY23 | FY24 | FY25 |
| Net Profits/Rs Cr | 54 | -8 | -25 | 3 | 7 | 18 |
The share price of Atul Auto was around Rs 190 in February 2021 and as on 19th February 2026 it was Rs 500, which is over a 160% jump in 5 years.
As for valuation, the company’s share is currently trading at a PE of 39x, and the current industry median is 44x. The 10-year median PE for the company is 28x, which is same as the industry median for the same period.
Given the low profits, the PE looks elevated probably due to heavy EV investment cycles, but are projected to normalize as AGPL synergies kick in.
The Debt-to-Equity ratio of the company is 0.3 while the industry median is 0.6, which means the company has a much stronger balance sheet than its peers. While the industry median suggests that most peers are leaning more heavily on borrowed capital to fund their EV transitions, Atul Auto is effectively playing with its own money.
Risks and Headwinds: The Global Lithium Trap
By moving its EV business into the parent company, Atul is now directly exposed to the volatility of global commodity prices, specifically lithium, cobalt, and nickel.
While Atul excels at chassis and body engineering, the battery cells remain a global commodity. A supply chain hiccup in China or a diplomatic row in South America could eat their margins overnight. Unlike Bajaj, which has a larger balance sheet to absorb these shocks, Atul’s smaller scale makes it more vulnerable to price swings.
Also, merging a high-tech EV division into a legacy ICE company sounds logical on paper, but it is operationally difficult. It requires retraining a workforce of thousands who are used to fixing mechanical pistons and fuel injectors, not troubleshooting circuit boards and software firmware.
All this while Bajaj and Mahindra are not standing still. Their Chetak and Treo are well-funded and have massive marketing budgets. Atul must rely on its product-first and service-first reputation to avoid being run over in the urban markets.
The Powertrain Arbitrage: Scaling ‘Atul Inside’ Across Emerging Markets
The most interesting aspect of the new Atul Auto is its global aspiration. Filings and management commentary from early 2026 suggest a push toward becoming a global platform company. Neeraj Chandra and his team aren’t just looking to sell vehicles in India; they are eyeing Southeast Asia and Africa.
The strategy involves selling the complete vehicle in India but offering a powertrain kit (the battery, BMS, and motor) to partners in international markets. This kit approach allows Atul to bypass high import duties in other developing nations while still profiting from its R&D. This is a page straight out of the high-finance playbook: moving from being a low-margin hardware manufacturer to a high-margin technology provider.
The 30% Litmus Test: Can the ‘Swan’ Outrun the Competition?
Atul Auto is a classic Old India meets New India story. It possesses the rugged, can-do attitude backed by decades of experience and expertise. With that, it is trying to wear the sleek, high-tech suit of an EV startup. With Vijay Kedia’s backing and a freshly streamlined corporate structure, the company is better positioned than it has been in a decade.
The next couple of years will be a real test though. If the company can maintain its 30% volume growth while successfully integrating the AGPL assets, it won’t just be a successful small-cap stock; it will be the blueprint for how traditional Indian manufacturing survives and thrives during the green revolution. You should add this stock to your watchlist to see how this story turns out.
Disclaimer:
Note: We have relied on data from www.Screener.in and www.trendlyne.com throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.
The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
Suhel Khan has been a passionate follower of the markets for over a decade. During this period, He was an integral part of a leading Equity Research organisation based in Mumbai as the Head of Sales & Marketing. Presently, he is spending most of his time dissecting the investments and strategies of the Super Investors of India.
Disclosure: The writer and his dependents do not hold the stocks discussed in this article.
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