ASK Automotive makes decent debut, lists at 8% premium to its issue price

ASK Automotive (ASK) made a decent stock market debut with its shares getting listed at Rs 304.90, an 8 per cent premium against its issue price of Rs 282 per share, on the BSE on Wednesday. The stock of the auto ancillary company opened at Rs 303.30 on the National Stock Exchange (NSE).
Post listing, the stock moved higher to Rs 311.70, up 11 per cent against the issue price on the NSE. At 10:03 AM, it was quoting at Rs 311.10 with a combined 7.8 million equity shares having changed hands on the counter on the NSE and BSE.

The company’s initial public offering (IPO) saw a strong response from the investors with issue getting subscribed 51 times. The institutional investor portion of the issue was subscribed 142 times, high networth individual portion 35 times, and retail portion close to nearly 6 times.

ASK is one of the largest manufacturers of brake-shoe and advanced braking (AB) systems for two-wheelers (2W) in India with a market share of approximately 50 per cent in FY23 in terms of production volume for original equipment manufacturers (OEMs), and the branded independent aftermarket (IAM) on a combined basis.

ASK has been serving each of the top six 2W OEMs in India that have a market share of around 93 per cent in the 2W industry. They have been successful in developing customer relationships and supply to EV based 2W OEMs in India such as TVS, Ather, Hero MotoCorp, Greaves, Bajaj, and Revolt. ASK is developing complex critical safety systems and solutions for globally customers such as Stanley Black & Decker, Polaris, and MTD Products with exports to 12 countries in FY23.

ASK is poised to be a net beneficiary of the electric vehicle (EV) revolution. The company already caters to the needs of all major players in the EV two-wheeler segment, and its products are compatible with a wide range of EV.

This positions ASK Automotive to capture significant market share in the growing EV two-wheeler segment, according to analysts.

ASK is led by a first-generation entrepreneur with a strong professional management, demonstrating strong growth, and efficient use of capital with a competitive advantage as it seeks to grow its business over the next few years. Its key business  — ABS — has high entry barriers with extensive and detailed vendor approval process of suppliers by OEMs, proprietary material formulations and technological prowess with various product lines being developed for the 3W, 4W and CV segments which will continue to drive the growth momentum in its business, analyst at Reliance Securities said.

“The company’s ALS division is witnessing growth in ICE and EV segments by introducing value added solutions for customers and has a strong pipeline of new products for domestic and exports market to benefit from the growing the Indian automotive industry. 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,” the brokerage firm said in a note.

However, ASK is heavily reliant on the Indian two-wheeler automotive sector with over 80 per cent of its revenue coming from this sector in the past three years. This means that the company’s performance is closely tied to the overall health of the Indian two-wheeler market. If sales of two-wheelers in India decline, the company’s revenue will likely suffer as well, according to Ventura Securities.

The company is also dependent on its top three customers for more than half of its revenue. This means that if the company loses any of these customers or if their business with these customers declines, it could have a significant negative impact on the company’s overall revenue. The company depends on third party suppliers for their raw material requirements of aluminum, the brokerage firm said.