ASK Automotive IPO is gearing up for its Initial Public Offering (IPO), set to open on November 7, 2023. As the largest manufacturer of brake shoes and advanced braking systems for two-wheelers in India, this IPO offers a significant investment opportunity. In this article, we will conduct a comprehensive review of the ASK Automotive IPO, encompassing all pertinent details, positive aspects, and potential risk factors.
ASK Automotive IPO – Dates & Issue Details
| IPO Opening Date | 07-Nov-23 |
| IPO Closing Date | 09-Nov-23 |
| IPO Listing Date | 20-Nov-23 |
| Issue Type | Book Built Issue IPO |
| Face Value | Rs 2 per equity share |
| IPO Price band | Rs 268 to Rs 282 per equity share |
| Lot Size | 53 Shares |
| Listing at | BSE and NSE |
| Total Issue Size | Rs. 834 Crores |
About ASK Automotive Limited
The company holds a prominent position as the largest manufacturer of brake shoes and advanced braking systems for two-wheelers in India. In Fiscal 2023, they secured a market share of approximately 50% in terms of production volume for original equipment manufacturers and the branded independent aftermarket, when considering both sectors collectively.
With a history spanning over three decades, the company has been a reliable supplier of safety systems and critical engineering solutions. They possess in-house expertise in designing, developing, and manufacturing these components. Notably, their product offerings are versatile, catering to a range of powertrains, including both electric vehicles and internal combustion engine OEMs. The brand “ASK” is widely acknowledged as a leading and trusted name in the two-wheeler independent aftermarket, based on production volume for Fiscal 2023 in India
ASK Automotive Limited – Financials
| Period Ended | 30 Jun 2023 | 31 Mar 2023 | 31 Mar 2022 | 31 Mar 2021 |
| Assets | 1,443.34 | 1,281.21 | 1,105.56 | 948.25 |
| Revenue | 657.55 | 2,566.28 | 2,024.26 | 1,567.77 |
| Profit After Tax | 34.83 | 122.95 | 82.66 | 106.20 |
| Net Worth | 643.77 | 631.91 | 622.23 | |
| Reserves and Surplus | 639.03 | 604.34 | 591.73 | 581.54 |
| Total Borrowing | 268.03 | 231.82 | 119.78 | 54.02 |
ASK Automotive IPO Valuation
Here are the key points regarding ASK Automotive Limited’s IPO pricing and valuation:
- IPO Price Band: The IPO is offered at a price band of Rs 268 to Rs 282 per share.
- P/E Ratio Analysis: When considering the FY23 EPS of Rs 6.18, the Price-to-Earnings (P/E) ratio calculates to be 46x. However, if we look at the weighted EPS from the last three years, which amounts to Rs 5.32, the P/E ratio is 53x.
- Peer Comparison: Comparing these P/E ratios with those of listed peers, Bharat Forge stands at the highest with a P/E of 99x, while Suprajit Engineering has a lower P/E of 17x. The industry average P/E is 58.3x.
- Valuation Assessment: Given the valuation landscape, the IPO’s price band, ranging from a P/E of 46x to 53x, appears to be fully priced when compared to the P/E ratios of industry peers. Investors should consider this valuation aspect before making investment decisions.
ASK Automotive IPO – Positive Factors
Here are the key points highlighting the company’s strengths in terms of its manufacturing and financial aspects:
- Established Manufacturer: The company is a well-established manufacturer of safety systems and critical engineering solutions, serving some of India’s largest original equipment manufacturers (OEMs).
- Research and Development Focus: The company’s production model is underpinned by robust research and development efforts, emphasizing advanced material knowledge. This enables them to customize systems and products to meet specific customer requirements while also engineering lighter precision products.
- Technology-Driven Manufacturing: The company’s manufacturing process is technology and innovation-driven. They offer a comprehensive range of systems and solutions for both electric vehicle (EV) and internal combustion engine (ICE) sectors. They maintain long-standing customer relationships with both Indian and global OEM players.
- Strong Financial Performance: The company’s financial and return metrics reflect significant growth and efficient capital utilization, underscoring its financial stability and effectiveness in managing resources
ASK Automotive IPO – Negative or risk factors
Here are key points summarizing the objectives and potential risks associated with the IPO and ASK Automotive Limited:
IPO Objective:
- Solely Offer for Sale (OFS): The IPO proceeds solely benefit selling shareholders, with the company not directly benefiting from the funds raised.
Risks:
- Two-Wheeler Automotive Sector Dependency: Over 80% of the company’s revenue is attributed to the Indian two-wheeler automotive sector. Any adverse developments or changes in this sector could negatively impact the company’s operations.
- Customer Concentration: The company relies heavily on its top three customers, who collectively contribute more than 80% of its revenue. The loss of such customers could have a significant impact on the company’s financials and operations.
- Raw Material Dependency: The business and profitability are significantly reliant on the availability and cost of raw materials, including Aluminum. Any disruptions in the timely supply or price volatility of these raw materials may adversely affect the company’s operations.
- Third-Party Raw Material Supply: The company depends on third-party suppliers for raw materials and does not have firm commitments for supply or exclusive arrangements, posing potential supply chain risks.
ASK Automotive IPO – Should you invest?
- Company is well established manufacturer of safety systems and critical engineering solutions for some of India’s largest original equipment manufacturers. Company has strong revenue growth in the past.
- On the other side, company margins are on declining mode (6.7% in FY20, 4% in FY21 and 4.8% in FY23). Its top 3 customers contribute to over 50% of the revenues which poses high risk. Its entire IPO proceeds would go to selling share holders and company would not get benefitted
Investors should go through all positive aspects and risk factors (internal and external risk factors from RHP) before investing in such IPOs.
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