ASK Automotive Limited IPO

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1. Market Leadership: The company claims to be the largest manufacturer of brake-shoe and advanced braking systems for two-wheelers in India. They hold a market share of approximately 50% in fiscal year 2023 for both original equipment manufacturers (OEMs) and the branded independent aftermarket (IAM). This market leadership is substantiated by a CRISIL report.

2. Diverse Product Portfolio: Over the years, the company has diversified its product portfolio. In addition to brake shoes and advanced braking systems, they also offer aluminum lightweighting precision (ALP) solutions, wheel assembly, and safety control cables (SCC) products. This diversification allows them to cater to a broader range of automotive and non-automotive sectors.

3. In-House Design and Engineering Capabilities: The company highlights its in-house design and engineering capabilities, which enable them to produce complex precision components and solutions. This focus on quality is likely a key selling point, especially in the automotive industry where safety and precision are critical.

4. Powertrain Agnostic: The company’s offerings are described as “powertrain agnostic,” meaning they can cater to both electric vehicle (EV) and internal combustion engine (ICE) OEMs. This flexibility positions them well to serve the evolving automotive market, where there’s a transition toward electric vehicles.

5. Recognized Brand: Their brand “ASK” is recognized as a leading brand in the two-wheeler IAM segment in India, according to the CRISIL report.

6. Importance of Products: The business emphasizes that braking systems and safety control cables are crucial for road safety, requiring technological expertise and research and development. Braking products are highlighted as having high entry barriers due to proprietary materials and manufacturing knowledge. SCC products are noted as essential parts in the automotive industry.

7. ALP Solutions for Efficiency: The company’s ALP solutions and products aim to improve performance, safety, and efficiency by reducing component weight and aiding in thermal management. This is particularly important for increasing durability and meeting environmental compliance standards for vehicles.

8. Key Customer Base: The company supplies its products to all of the top six two-wheeler OEMs in India. Given that India has one of the largest two-wheeler markets in the world, this customer base is significant. Furthermore, the business has established long-standing relationships with these OEMs, ranging from 16 to 30 years.

9. Expansion into Electric Vehicles: The company has also ventured into the electric vehicle (EV) market by supplying products to two-wheeler EV OEMs in India, including well-known companies like TVS, Hero MotoCorp, and Bajaj. This demonstrates their adaptability to changing market trends.

Objects of the ASK Automotive Limited IPO:

The company will not receive any proceeds from the Offer and all the Offer Proceeds will be received by the Selling Shareholders, in proportion to the Offered Shares sold by the respective Selling Shareholders as part of the Offer.

ASK Automotive Limited IPO Details:

Open Date: Nov 07 2023
Close Date: Nov 09 2023
Total Shares: 29,571,390
Face Value: ₹ 2 Per Equity Share
Issue Type: Book Built Issue IPO
Issue Size: 834.00 Cr.
Lot Size: 53 Shares
Issue Price: ₹ 268 to ₹282 Per Equity Share
Listing At: NSE,BSE
Listing Date: Nov 20 2023

Promoters And Management:

Kuldip Singh Rathee is the Chairman and Managing Director on the Board. He is also one of the Promoters and a founder of the Company. He holds a bachelor’s degree in arts (economics honours) from University of Delhi, New Delhi, Delhi. He has previously served in the Central Reserve Police Force where he was directly recruited for the post of deputy superintendent of police in 1974 and served till 1978. He has also previously been enlisted as a contractor in Class I (B&R) with the Directorate General of Works, Central Public Works Department, Government of India. He has experience in the real estate sector and in the manufacturing sector. Vijay Rathee is a Non-Executive Director on the Board and is one of the Promoters of the Company. She holds a bachelor’s degree in science from Guru Nanak University, Amritsar, Punjab and a master’s degree in science (Zoology) from Birendra Narayan Chakravarty University, Kurukshetra, Haryana. She has experience in the banking sector and the manufacturing sector. She was previously associated as an officer with Punjab & Sind Bank. Prashant Rathee is a Whole-Time Director on the Board. He holds a bachelor’s degree in commerce from University of Delhi, New Delhi, Delhi. He was previously a director on the board of A.A. Autotech Private Limited from 2008 till it merged with the Company, where he gained experience in the manufacturing sector. He is currently responsible for the operations vertical of the Company.

Financials of ASK Automotive Limited IPO:

A. Balance Sheet
Particular (In Million) Mar-21 Mar-22 Mar-23
Equity Share Capital 406.89 401.79 394.29
Reserves 5,815 5,917 6,043
Borrowings 799 1,598 3,180
Trade Payables 1,494 1,788 1,699
Other Liabilities 968 1,350 1,496
Total Liabilities 3,260 4,737 6,374
Net Block 4,081 4,630 4,565
Capital Work in Progress 98 29 1,182
Investments 34 0 40
Other Assets 2,251 3,012 3,020
Total NC Assets 6,464 7,671 8,807
Receivables 1,586 2,012 2,104
Inventory 1,127 1,244 1,536
Cash & Bank 187 16 24
Other Assets 77 103 341
Face value 2 2 2
B. Profit & Loss Statement
Particular (In Million) Mar-21 Mar-22 Mar-23
Sales 15,440 20,131 25,552
Raw Material Cost 10,154 14,038 17,986
Change in Inventory -173 -104 -168
Other Mfr. Exp -37 -24 -47
Employee Cost 1,023 1,227 1,394
Other Expenses 2,609 3,282 4,023
Other Income 238 112 111
Depreciation 519 559 607
EBITDA 2,101 1,823 2,475
EBITDA Margin 13.61% 9.05% 9.69%
Interest 109 81 112
Profit before tax 1,430 1,130 1,698
Tax 368 303 468
Net profit 1,062 827 1,230
NPM (%) 6.77% 4.08% 4.79%
C. Cash Flow Statement
Particular (In Million) Mar-21 Mar-22 Mar-23
Cash From Operating Activity
Profit From Operation 1,895 1,734 2,414
Receivable -693 -419 -92
Inventory -196 -117 -292
Payable 516 295 -90
Other WC Items 94 251 -110
Working Capital Changes -280 10 -584
Direct Taxes -335 -302 -444
Net Cash Inflow from Operating Activity 1280 1442 1386
Cash from Investing Activity
Fixed assets purchased -475 -858 -1,541
Fixed assets sold 14 9 42
Investments purchased 0 0 -120
Investment sold 246 0 0
Dividends received 4 0 0
Other investing items 152 49 10
Net cash inflow from investing activities -60 -800 -1,609
Cash from Financing Activity
Proceeds from borrowings 200 962 1,817
Repayment of borrowings -1,069 -164 -235
Intrest paid fin -107 -67 -143
Dividends paid -20 0 0
Financial liabilities -68 -807 -97
Other financing items -3 -739 -1,110
Net Cash Flow 152 -172 9

Comparison With Peers:

Name of the Company Revenue (In Crore) PAT (In Crore) EPS ( in Rs) P/E CMP Mcap (In Crore)
ASK Automotive Limited 2,555 123 6.23 45.2 282 5,559
Endurance Technologies Limited 8,804 480 34.09 44.7 1,714 24,107
Uno Minda Limited 11,236 700 11.4 48.4 581 33,297
Suprajit Engineering Limited 2,752 152 10.99 33.6 383 5,299
Bharat Forge Limited 12,910 508 11.35 86.2 1,076 50,095
* All the data is as per FY23.

Recommendation on ASK Automotive Limited IPO:

Review and Recommendation of ASK Automotive IPO by IZ team is 5/10

A) Company Overview

1. ASK Automotive was incorporated in 1989. 2. The company started as a manufacturer of brake shoe products for two-wheelers. 3. It has diversified its operations to include. a) AB (Advanced Braking) systems b) ALP (Aluminum Lightweight Precision) solutions c) Wheel assembly for two-wheeler OEMs. d) Safety control cables (SCC) products.

B) Market Position

a) ASK Automotive is a leading player for two-wheeler OEMs in India with a 9% market share in production volume as of FY23. b) The company is the largest manufacturer of brake shoes and AB systems for two-wheelers in India, with approximately 50% market share in production volume for OEMs and the branded independent aftermarket combined. c) They have in-house design and engineering capabilities, focusing on quality and delivering complex, precision components.

C) Market Performance

a) ASK Automotive supplies to the top six two-wheeler OEMs in India, which is the largest motorized two-wheeler market in the world, with domestic sales of 16.25 million units during FY23. b) In FY22, they began supplying commercial components to two-wheeler EV OEMs in India, including TVS Motor, Ather Energy, and Hero MotoCorp.

D) Why to Invest?

ASK Automotive has established itself as a significant manufacturer of safety systems and critical engineering solutions to some of India's largest Original Equipment Manufacturers (OEMs). Given India's stature as one of the largest exporters of two-wheelers globally, ASK Automotive's comprehensive portfolio that includes EV and powertrain-agnostic products positions the company favorably in the market. The company's initiative to develop capabilities for product migration from steel and plastics to aluminum for lightweight and efficient thermal management for e-powertrain products aligns with the industry's shift towards electric vehicles. The inherent complexity and capital-intensive nature of their business create significant barriers to entry, potentially limiting competition and bolstering ASK Automotive's position in the market.

E) Industry Outlook

a) The advanced braking systems market is estimated to grow at a compound annual growth rate (CAGR) of 8.9% over the next five years, suggesting a robust growth trajectory for ASK Automotive. b) The Indian government's Production Linked Incentive (PLI) scheme for the auto sector is anticipated to catalyze exports and bolster the demand for auto components.

F) Valuation Outlook and Key Risks

a). The IPO is coming at P/E of 45x and it is a pure OFS. The Valuation looks on higher side as compared to peers. b) The company's reliance on its top three customers for a substantial portion of its revenue, with the largest customer alone contributing over 30% is a risk to consider. c) They are depending on third-party suppliers for raw materials, without firm commitments, introduces supply chain risks.

Registrar of ASK Automotive Limited IPO:

  1. Link Intime India Private Limited

Company Address:

ASK Automotive Limited Flat No. 104, 929/1, Naiwala,Faiz Road Karol Bagh,New Delhi 110 005 Phone: +91 124 4396907 Email: Website

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