ASK Automotive floats Rs 834-crore IPO, brokerages offer bullish views

The price band for the issue, which will close on November 9, has been fixed at Rs 268-282 per share

The ASK Automotive IPO opened for subscription on November 7 with the Rs 834-crore public issue receiving a ‘subscribe’ rating from several analysts owing to the company’s decent financial performance and reasonable valuation. The price band for the issue, which will close on November 9, is fixed at Rs 268-282 per share.

Since the issue is entirely an offer-for-sale of 2.95 crore shares, all the proceeds from the IPO will go to the selling shareholders. The promoters of the company are Kuldip Singh Rathee and Vijay Rathee.

Anchor Investors

Ahead of the IPO, the company raised Rs 250.20 crore from anchor investors. A total of 25 investors participated in the anchor book, including marquee names such as Morgan Stanley, Goldman Sachs, Neuberger Berman, Florida Retirement System, Integrated Core Strategies, BNP Paribas Arbitrage, Societe Generale, and Copthall Mauritius Investment.

Domestic institutions, including Nippon Life India, ICICI Prudential Mutual Fund, SBI Life Insurance Company, Tata Mutual Fund, ICICI Prudential Life Insurance Company, Canara Robeco Mutual Fund, Abakkus Diversified Alpha Fund, Edelweiss Trusteeship and Bajaj Allianz Life Insurance Company, also picked up stakes in the company.

Also Read: ASK Automotive garners Rs 250 crore from anchor investors ahead of IPO

Financial Performance

ASK Automotive recorded a year-on-year revenue growth of 27 percent in FY23, reaching Rs 2,555 crore. The company's profit after tax stood at Rs 123 crore for FY23, compared to Rs 82.65 crore in FY22 and the PAT margin improved to 4.79 percent from 4.08 percent in the same period. Return on average equity (RoAE) rose to 19.27 percent in FY23 from 13.33 percent in FY22, while the return on average capital employed (RoACE) climbed to 22.06 percent from 16.76 percent.

The company’s adjusted net debt increased from Rs 158.49 crore in FY22 to Rs 315.78 crore in FY23, driving the net debt-to-equity ratio to 0.49x from 0.25x in the same period.

Company Profile

ASK Automotive is the largest manufacturer of brakeshoe and advanced braking systems for two-wheelers in India with a market share of approximately 50 percent in fiscal 2023 in terms of production volume for original equipment manufacturers (OEM) and the branded independent aftermarket (IAM), on a combined basis.

As of June 2023, the company had 15 manufacturing units across five states. ASK Automotive supplies to OEMs such as HMSI, HMCL, Suzuki, TVS, Yamaha, Bajaj, Royal Enfield, Denso, and Magneti Marelli. It has recently expanded its operations to cater to the top names in the EV sector like TVS Motor, Ather, Hero Motocop, Greaves, Bajaj Auto and Revolt.

Key Risks

The company is dependent on its top three customers, who contribute more than 50 percent of its revenue from operations, with its single largest customer contributing approximately 30 percent of its revenue from operations in each of the last three fiscals. Loss of any of these customers or a reduction in purchases by any of them could adversely affect the company’s business, results of operations and financial condition.

The company depends on third parties for the supply of raw materials and does not have firm commitments for supply or exclusive arrangements with any of its suppliers.

Also Read: Protean eGov Technologies IPO: Financials, return ratios, operational parameters in 5 charts

Should you subscribe to ASK Automotives’ IPO?

Reliance Securities: Subscribe 

“ASK will continue to grow better than the industry able to diversify its product basket, offer new solutions for existing products and increase the content per vehicle for its products,” said analysts at Reliance Securities and recommended a ‘subscribe’ rating to the issue.

Canara Bank Securities: Subscribe

“This issue is available at a P/EPS of 45.63x for FY2023 which appears fairly priced with peers. Hence, we recommend to subscribe the issue for listing gains,” said analysts at Canara Bank Securities.

BP Wealth: Subscribe

Analysts at BP Wealth recommended a ‘subscribe’ rating for the benefit of listing gains as most of the positives seem priced in the offering.

Swastika Investmart: Subscribe

“Looking at the long-term growth prospects of the company, we give a ‘Subscribe’ rating to this IPO for the long term,” said analysts at Swastika Investmart.

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