ASK Automotive Limited IPO

About the company:

Commenced in 1989, ASK Automotive Limited today is the largest manufacturer of brake-shoe and advanced braking (“AB”) systems for two-wheelers (“2W”) in India with a market share of approximately 50% in Fiscal 2023 in terms of production volume for original equipment manufacturers (“OEMs”) and the branded independent aftermarket (“IAM”), on a combined basis (Source: CRISIL Report). It has been supplying safety systems and critical engineering solutions for more than three decades with in-house designing, developing and manufacturing capabilities. AAL's offerings are powertrain agnostic, catering to electric vehicle ("EV") as well as internal combustion engine ("ICE") OEMs. The company has diversified its business in both the automotive and non-automotive sectors. Offerings include: (i) AB systems; (ii) aluminium lightweighting precision (“ALP”) solutions; (iii) wheel assembly to 2W OEMs; and (iv) safety control cables (“SCC”) products. It supplies its portfolio of AB systems, ALP solutions, wheel assembly, and SCC products to OEMs in (i) the automotive sector for 2Ws, three wheelers (“3Ws”), passenger vehicles (“PVs”) and commercial vehicles (“CVs”), and (ii) the non-automotive sector for all-terrain vehicles (“ATVs”), power tools and outdoor equipment.

Revenue Segmentation

Product Offerings Segmentation

Strengths

- Well established manufacturer of safety systems and critical engineering solutions for some of India’s largest original equipment manufacturers
- Robust production model driven by research and development and design with an emphasis on: (i) advanced material knowledge to customize systems and products based on customer specifications and (ii) engineering lighter precision products
- Technology and innovation-driven manufacturing process, with an extensive suite of systems and solutions for EV and ICE sectors
- Long-standing customer relationships with both Indian and global OEM players
- Financial and return metrics demonstrating growth and efficient use of capital
- Professional management and board

Financials

The revenue from operations has grown at a CAGR of 28.64% between Fiscals 2021 and 2023, and by 8.74% from Rs 603.73 Cr. in the three months ended June 30, 2022 to Rs 656.50 Cr. in the three months ended June 30, 2023, demonstrating growth in our financial performance in recent years, and positioning us for future growth and further diversification of our customer base and offerings.

Strategies

- “Electrification”– further strengthen the company’s position in the growing EV sector in India
- Continue to focus on our design, research and development and engineering capabilities to develop innovative systems and solutions, as well as improve our manufacturing efficiencies
- Further diversify the product offerings in the AB systems and ALP solutions categories and expand the addressable market
- Leverage export opportunities and enter new markets
- Increased focus on independent aftermarket sales and spares

Risks

- Top 3 customers contribute more than 50% of the revenue from operations with the single largest customer contributing ~30% in each of the last 3 fiscals
- The company is dependent on third parties for the supply of raw materials and do not have firm commitments for supply or exclusive arrangements with any of its suppliers. Loss of suppliers may have an adverse effect on its business, results of operations and financial condition.
- Pricing pressure from its customers or the company’s inability to fully pass on costs to its customer, may impact the revenue from operations and profitability