Leading two-wheeler brake systems supplier, ASK Automotive, is preparing to launch an initial public offering (IPO) aiming to raise ₹834 crore. The move will reduce the promoter's stake from 100% to 75%. The company has consistently outperformed the two-wheeler sector, diversifying into non-auto verticals and introducing new auto products.
ASK Automotive's powertrain agnostic products have been instrumental in sustaining orders from internal combustion engine vehicles while simultaneously gaining additional orders from electric vehicles. These electric vehicle orders come at higher realization rates, nearly 50-60% higher than EV vehicles for the company.
The company has a significant presence in the advanced braking systems market, holding over 50% share. It supplies to major companies such as Hero Motocorp, Honda (NYSE:HMC) Motorcycle & Scooter, TVS Motor, Suzuki, Bajaj Auto, and Royal Enfield. From FY21 to FY23, ASK Automotive's annual revenue grew by 29%, reaching ₹2,555 crore.
Innovation remains a key focus for ASK Automotive. The company is currently concentrating on advanced lightweight solutions using aluminium which is 40% lighter than steel. This initiative is driving demand from electric vehicle companies.
Despite deriving over 90% of its revenue from the two-wheeler industry, the company has demonstrated superior Return on Capital Employed (RoCE) of 22% and an asset turnover of 2.14 due to efficient production and optimal asset utilization. The top three customers contribute two-thirds of total revenue.
Between FY21 and FY23, the company's operating profit rose by 8.4% to ₹247 crore, while net profit expanded at a rate of 7.5% to ₹122.9 crore. At the higher end of the price-band, ASK Automotive is demanding 39 times of its annualized earnings of Q1 of FY24, compared to peers trading between 25-59 times.
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