Can Hero Cycles acquire Atlas Ops?

Atlas’s decision to wind up its last working unit in Sahibabad (Ghaziabad) came on the World Bicycle Day (3rd June).

In the manufacturing business since 1951, Atlas had to shut down its operations due to lack of funds. They had started making losses since 2014.

The plant had started in 1989, and it was the last operational plant of Atlas Cycles, producing 2 Lakh+ Bicycles monthly.

The severe cash crunch has put a stoppage on the procurement of raw materials. Atlas is currently looking at different sources of accumulating funds.

Atlas was market leader for at least 20 years. Then a fierce No. 2 for another 10 years. There was no visible change in the marketing and advertising front.

This led to a lower sales in the new generation kids who wanted funky colors, new designs and advanced looking cycles.

Why Hero Cycles could be touted as a company which could acquire Atlas?

Acquisition isn’t new for Hero Cycles. They purchased FireFox Bikes in India in 2015 in an all cash deal.

In 2016, they had purchased a 60% equity in Sri Lankan based bicycle manufactures BSH Ventures.

In January 2020, they purchased stake in a German premium e-bike maker by the name of HNF Nicolai.

Hero Cycles is aggressively looking at buying brands globally, and currently are a zero net-debt company with cash reserves of over Rs 1,000 crore.

Hero Cycles currently has a 43% Market Share in the cycle industry and is the country’s biggest cycle company.

In states such as Bihar and Odisha, where the migrant labor is returning, there is a surge in the demand for commuter cycles.

Hero Cycles is looking at business to grow on a large scale level due to possible restrictions on Trade with China.

On 2nd July, Atlas has released a statement that they are not looking to sell Atlas and also aren’t considering any acquisition offers from Hero Cycles.

They are currently exploring on the various sources of infusion of funds.

How could the business see a reversal in fortunes?

Thoughts?

By – Anish