ASK Automotive Ltd IPO

Last Updated on November 6, 2023 by BFSLTeam BFSLTeam

ASK Automotive Ltd is the largest maker of brake-shoes and advanced braking systems for two-wheelers in India. The automotive company maintains a comprehensive portfolio of powertrain-agnostic and EV parts. It also supplies engineering solutions and safety systems to 9 EV OEMs in India. 

ASK Automotive filed its draft papers with SEBI in June 2023 to float its IPO. The leading brake-shoe maker will now float its IPO on November 7 2023. It will stay open for investors till November 9 2023. The IPO will consist of only an Offer for the Sale (OFS) of equity shares of up to 29,571,390 by its promoters. Learn more about ASK Automotive Ltd IPO and the company’s financials, strengths, and risk factors before investing. 

IPO Details 

Refer to the table below for details of the upcoming ASK Automotive Ltd IPO: 

IPO Subscription Period	From November 7 2023 to November 9 2023
Listing Date	Monday, November 20, 2023
Price Band	₹268 to ₹282 per share
Face Value	Rs. 2 each share
Lot Size	53 Shares
Total Issue Size	29,571,390 shares (aggregating up to ₹834.00 Cr)
Offer for Sale	29,571,390 shares of ₹2 (aggregating up to ₹834.00 Cr)
Type of Issue	Book Built IPO
Listing on Exchanges	NSE and BSE

About Company 

Being the largest producer of brake shoes and advanced braking systems for two-wheelers, ASK Automotive held 50% of the market share in FY 2022. The company has been a prominent supplier of engineering solutions and safety systems for over 3 decades. It has in-house designing, development and production facilities. 

The company is recognised as the top company in the 2W IAM in terms of volume of production for the Financial Year 2022. 

ASK started its operations in 1989 as a manufacturer of brake shoes for only 2-wheelers. Since then, it has diversified its business and now includes the following: 

• Aluminium lightweight precision solutions (ALP)
• AB systems 
• Safety control cables products (SCC)
• Wheel assembly for 2W OEMs

Apart from operating domestically, the company also has many customers overseas, in the automotive as well as non-automotive segments. Some renowned customers outside India include – 

• UFI  Filters India Private  Limited
• Federal-Mogul  Italy s.r.l. (racing  &  183 motorcycle division)
• FDP Virginia Inc
• Stanley Black & Decker
• MTD Products Inc
• Polaris Industries Inc

The company maintains 15 operating facilities in India spread over 5 states. Another manufacturing facility in Rajasthan is presently under development. 

Also Read: How does an IPO work?

IPO Tentative Table 

ASK Automotive Ltd IPO will be open for subscription from November 7 2023. Find some important tentative dates of the IPO in the table below: 

Anchor Allocation Date	Monday, November 6, 2023
IPO Opening Date	Tuesday, November 7, 2023
IPO Closing Date	Thursday, November 9, 2023
UPI Mandate Confirmation Cut-Off Date	5 PM on November 9, 2023
Allotment Basis	Wednesday, November 15, 2023
Initiation of Refunds	Thursday, November 16, 2023
Listing Date	Monday, November 20, 2023
Share Credit into Demat	Friday, November 17, 2023

IPO Lot Size 

Check the lot size for the IPO of ASK Automotive Limited IPO:  

Applications	Lots	Shares	Amount
Retail (Min)	1	53	Rs.14,946
Retail (Max)	13	689	Rs.1,94,298
S-HNI (Min)	14	742	Rs.2,09,244
S-HNI (Max)	66	3,498	Rs.9,86,436
B-HNI (Min)	67	3,551	Rs.10,01,382

Company Financials 

Potential investors must know about a company’s financial performance in recent years to make an informed financial decision. The following table lays down crucial financial details as per ASK Automotive DRHP: 

Parameters* as Per the Year Ending On	March 31 2023	March 31 2022	March 31 2021
Total Assets	12,812.08	11,055.63	9,482.53
Total Liabilities	6,374.37	4,736.55	3,260.28
Total Expenses	23,906.29	19,059.94	14,203.99
Total Revenue	25,662.79	20,242.60	15,677.67
Profit After Tax	1,229.53	826.59	1,062.01
EBITDA	2,475.45	1,822.58	2,101.12
Earnings Per Share (EPS) (Basic and Diluted)	6.18	4.09	5.22

*All values in Rs. millions except EPS 

Also Read: IPO investment strategy

Strengths 

Here are some of the notable strengths of ASK Automotive Ltd: 

• India is the largest market for motorised 2-wheelers as well as the largest exporter of the same. There has been a domestic sale of 13.73 million vehicles in FY 2022 alone. ASK Automotive supplied its manufactured products to the top six 2-wheeler OEMs during this period. 
• The company has a robust production system powered by its research development and design team. Additionally, they have advanced material knowledge to personalise systems and products as per customer’s requirements. 
• Innovation and technology play a crucial role in developing critical engineering solutions and safety systems. The company performs extensive research, development, and designing activities to develop customised systems for EV and ICE vehicles. 
• The company has a diverse customer base in India as well as many offshore clients. It maintains a long-standing relationship of over 15 years with the leading vehicle manufacturers as of March 31 2023. 
• ASK Automotive has seen a growth of 28.64% CAGR in its operating revenue for the period between FY21 and FY23. It holds great potential for future growth and diversification. 

Risk Factors 

Now that you know how the company has been performing over the previous years, you should also be aware of its underlying risks. These have the potential to adversely affect the operations of the company:

• Over 80% of this company’s revenue comes from the Indian two-wheeler automotive sector as per the last three financial years. Any adverse change in this sector can significantly impact its business, revenue, and operations. 
• The company has a long-standing customer base and it is highly dependent on the top 3 customers who contributed over 50% of the revenue from operations. Among them, the largest customers contributed more than 30% to its revenue. Thus, a loss or reduction in business from any of these customers can hurt its revenue.

Also Read: Risk of investing in IPO

Outlook & Valuation

Regarding financial results, AAL reported total income/net profit of Rs. 1567.77 Cr. / Rs. 106.20 Cr. (FY21), Rs. 2024.26 Cr. / Rs. 82.66 Cr. (FY22), and Rs. 2566.28 Cr. / Rs. 122.95 Cr. (FY23). On total revenue of Rs. 657.55 Cr, it generated a net profit of Rs. 34.83 cr during the first quarter of FY24, which concluded in June 2023. AAL has reported an average EPS of Rs. 5.32 and an average RoNW of 16.75% over the previous three fiscal years. Based on its post-IPO NAV of Rs. 34.41 and its NAV of Rs. 34.41 as of June 30, 2023, the issue is priced at a P/BV of 8.20. The asking price has a P/E ratio of 39.89 if we annualize FY24 earnings and credit it to the company’s paid-up equity capital after the initial public offering. The company reported PAT margins for the reporting periods as follows: 6.77% (FY21), 4.08% (FY22), 4.79% (FY23), and 5.30% (Q1-FY24); correspondingly, RoACE margins were 21.98%, 16.76%, 22.06%, and 5.31%.

Summary 

The ASK Automotive Ltd IPO will consist of only an Offer for Sale. Promoters Kuldip Singh Rathee and Vijay Rathee will sell up to 2,06,99,973 and 88,71,417 shares, respectively. The entire proceeds from the IPO will go to the offloading shareholders and the company will not receive any funds from it. However, it will benefit the company indirectly by enhancing its brand image and visibility.

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