Indian auto component manufacturer, ASK Automotive, is set to launch an IPO worth ₹834 crore, marking a reduction in the promoter's stake from 100% to 85%. The shares for the IPO, scheduled from November 7th to November 9th, are priced between ₹268- ₹282 per share, with a listing expected on November 20th. The company has voiced opposition to the Grey Market Premium (GMP), deeming it contrary to SEBI guidelines.
ASK Automotive operates from 15 plants across India and holds a significant 50% volume market share in the country's two-wheeler brake-shoe manufacturing sector. The company generates a substantial portion of its ₹2,600 crore annual revenue—76%—from supplies to auto OEMs, with products such as Advanced Braking System and Aluminium Lightweighting Precision being key contributors. A joint venture with Brazilian brake pad maker FRAS-LE and the commissioning of new plants in Rajasthan and Karnataka hint at further growth potential.
In FY23, ASK's revenue saw a year-on-year increase of 27%, reaching ₹2,555 crore, a growth primarily driven by exports. This was accompanied by EBITDA and net margins of 9.5% and 4.8%, respectively. Despite maintaining a healthy net debt-to-equity ratio of 0.6:1 and a fixed asset turnover ratio of 5x, concerns have been raised over the misuse of working capital loans for long-term purposes, as flagged in audit reports.
Recent buy-backs amounting to ₹150 crore over FY22 and FY23, which resulted in an effective outgo of ₹175 crore including tax on buy-back, are viewed as a strategy by the promoter to maximize annual profit before the IPO launch. This move has led to a decrease in cash equivalents and an increase in debt for capex funding, potentially influencing Return on Equity (RoE) projections.
The shares are being offered at an EV/EBITDA multiple of 20x based on FY24E EBITDA of ₹300 crore. Despite this, they are considered fully priced when compared to peers like Suprajit Engineering and Endurance Technologies. The IPO distribution includes 50% for qualified institutional buyers and 35% for retail investors.
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