Auto ancillary player ASK Automotive will start the first day of trade with around 10% gains on Wednesday, November 14, analysts say. The expected decent listing is being attributed to its healthy subscription numbers, largest manufacturer of brake-shoe and advanced braking (AB) systems for two-wheelers (2W) in India with a market share of approximately 50%.

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The initial public offering (IPO) of ASK Automotive was subscribed 51.14 times at close. The strong subscription was led by Qualified Institutional Buyers (QIBs), whose category was booked a massive 142.41 times, followed by NII quota at 35.47 times, and the retail portion at 5.70 times.

"Despite being 100% offer-for-sale (OFS) by the Rathee family and fully priced-in IPO offer, the entire issue received an overwhelming response from all kinds of investors especially from QIB’s 142 times. We believe the demand was on the back of the company being the largest manufacturer and supplier (preferred partner) of brake-shoe and ABS catering to almost all automobile companies in the critical equipment segment acted as a proxy play for the automobile sector," said Prashanth Tapse, Research Analyst

Sr VP Research at Mehta Equities.

Further, Tapse said the listing would see a decent 10%+ premium even after seeing strong demand from all sets of investors.

Considering all the factors, the analyst believes that ASK Automotive gives allotted investors a long term opportunity to hold and raid the growth in automobile sector. "Hence, recommend all allotted investors to 'hold for long term' while those who failed to get allotments can accumulate on the listing day for holding it for healthy long term returns as markets always reward a player who has high visibility and growth potential," he noted.

Ahead of the listing, the company's shares are trading with a premium of ₹23 in the grey market, indicating a gain of 8% on debut.

The grey market is an unofficial platform wherein the IPO shares can be bought and sold till the listing. Investors generally get a bit of help from the grey market to guess the possible listing price of any IPO.

The issue consisted of only an OFS of 2.95 crore equity shares by the Rathee family. Hence, the entire IPO proceeds will go them and the company will not get any money from offer.

The price band for the IPO was ₹268-282 per share.

JM Financial, Axis Capital, ICICI Securities, and IIFL Securities acted as the book-running lead managers to issue. The shares of the company is expected to start trading on the bourses with effect from November 15, i.e. T+3 timeline instead of T+6 timeline set by the company earlier.

ASK Automotive has recently expanded its operations to cater to the top names in the EV sector such as TVS Motor, Ather, Hero Motocop, Greaves, Bajaj Auto and Revolt, which has further increased its market share.

As of June 30 this year, the company operated 15 manufacturing facilities across five states in India, the majority of which are strategically located near its OEM customers.

On the financial front, ASK Automotive posted a turnover of ₹1,544 crore, ₹2,013 crore and ₹2,555 crore for FY21, FY22 and FY23, respectively, on a consolidated basis. The company saw a net profit of ₹106 crore, ₹83 crore and ₹123 crore, respectively for the aforementioned period.

Its revenues registered a CAGR of 28% while profit was lower FY21-23 at 7.6% with variation in net margins. The revenue split between the three major businesses is ABS (41.8%), and ALPS (38.9). Wheel Assembly (13.8%) and SCC (3.5%) for FY23 and each of the business segments is exploring strong growth opportunities.

First Published:Nov 13, 2023 3:20 PM IST