ASK Automotive , a key player in the automotive components industry, is poised for growth as Chairman Kuldip Singh Rathee expresses optimism about the anticipated GST reforms. The company expects these changes to significantly benefit the two-wheeler segment, which has been struggling to recover to its FY2018-19 volume levels.

Aftermarket Business Set to Benefit

The company's aftermarket business, which currently contributes Rs 400.00 crore in revenue, is expected to see a substantial boost. This optimism stems from the potential reduction in GST rates from 28% to 18% on parts supplied to the independent aftermarket.

Two-Wheeler Market Recovery

Rathee highlighted the challenges faced by the two-wheeler market in recent years. He noted that two-wheeler prices have surged from Rs 60,000.00 to Rs 90,000.00, primarily due to the impact of the Covid-19 pandemic and the transition from BS4 to BS6 emission norms. This price increase has significantly affected consumer demand.

Despite these challenges, Rathee expressed confidence in the market's recovery. He anticipates that the current financial year will see two-wheeler sales surpassing the highest numbers recorded in 2018-19.

Economic Impact of GST Reforms and US Tariffs

The expected GST reforms are projected to have a positive impact on the Indian economy, potentially boosting GDP by 100 basis points. However, this growth might be partially offset by US tariffs, which could impact growth by 30-50 basis points.

ASK Automotive's Position and Growth Strategy

ASK Automotive maintains a relatively low export exposure at 4.70%, with exports to the US accounting for approximately 3.00%. This limited exposure might help insulate the company from potential negative impacts of US tariffs.

Looking ahead, the company is targeting mid-teens growth while aiming to improve its EBITDA margins. This improvement is expected to come as ASK Automotive phases out its wheel assembly business.

Outperforming Industry Growth

Excluding the wheel assembly segment, ASK Automotive has demonstrated strong performance, growing at 11.10% compared to the industry growth of 0.70%. This outperformance underscores the company's resilience and strategic positioning in the automotive components sector.

As the automotive industry navigates through regulatory changes and economic challenges, ASK Automotive appears well-positioned to capitalize on the anticipated reforms and market recovery in the two-wheeler segment.

ASK Automotive Limited delivered a strong performance in the first quarter, outpacing the two-wheeler industry growth and achieving significant improvements in profitability.

Revenue Growth and Segment Performance

The company reported a consolidated revenue growth of 3.5% year-on-year. Excluding the strategically reduced wheel assembly business, which declined by 53.5%, the core business segments saw an impressive 11.1% revenue growth. This growth was achieved despite the overall two-wheeler industry's production volume increasing by only 0.7% during the same period.

All three of ASK Automotive's business segments showed positive growth:

• Advanced Braking System: 4% growth
• Aluminum Light-weighting Precision Solutions: 15% growth
• Safety Control Cable: 6% growth

Profitability Improvements

ASK Automotive achieved substantial improvements in its profitability metrics:

Operational Highlights

The company's new Bangalore facility, commissioned in January, delivered positive EBITDA in its first full quarter of operations. Management expects this facility to reach 60% capacity utilization by Q2 and become cash positive in the same quarter.

Export Performance and Outlook

Export revenue remained flat at Rs. 33.00 crore due to global geopolitical uncertainties. However, the company maintains its target of 20% year-on-year growth in exports for the fiscal year.

Customer Base and Market Position

ASK Automotive continues to maintain its strong position in the two-wheeler component market. Its top customers include:

1. Honda Motorcycle and Scooter India (HMSI): 35% of revenue
2. TVS: 20-21% of revenue
3. Hero MotoCorp: 17% of revenue

Future Outlook and Expansion Plans

Despite the subdued growth in the two-wheeler industry, ASK Automotive maintains its guidance for mid-teens revenue growth in the fiscal year. The company has announced a CAPEX plan of Rs. 450.00 crore for the year to support its growth initiatives.

Additionally, ASK Automotive has entered into a joint venture with TD Holding for sunroof cables production, marking its entry into a new product category and expanding its presence in the passenger vehicle segment.

Management Commentary

Kuldip Singh Rathee, Chairman and Managing Director of ASK Automotive, commented on the results, stating, "We have sustained our market leadership position in the Advanced Braking system. Our aim is not only to sustain this level of EBITDA margins but continue our efforts to improve gradually in the subsequent quarters, depending upon the growth of the two-wheeler industry."

ASK Automotive's strong quarterly performance, coupled with its strategic initiatives and expansion plans, positions the company well for continued growth in the evolving automotive components market.