Ask Automative Ltd - Management Discussion and Analysis (MD&A)

 

ABOUT THE COMPANY :

ASK Automotive Limited is a Public Listed Indian auto ancillary major, having pioneered in providing Advanced Braking (AB) Systems and Solutions for the country’s automobile market. Founded in 1988 by the first-generation entrepreneur and visionary Mr. Kuldip Singh Rathee, ASK Automotive is today India’s Largest Manufacturer of 2W Advanced Braking Systems, commanding an ~ 50% share of the Indian two-wheeler market for Advanced Braking Systems including, brake shoes, disc brake pads and brake panel assemblies.

The Company is also among the leading manufacturers of Aluminium Lightweighting Precision Solutions (die-casting to critical machining, paint shop, and critical assemblies) for automotive and non-automotive applications and has successfully achieved a unique positioning across Automobile OEMs with powertrain agnostics products focussing on EV domain.

Having established a stronghold in the two-wheeler segment, The Company With over three decades of rich industry experience, ASK Automotive has made strong investments to grow with the new and changing Auto Industry ecosystem. The Company boasts 18 strategically located state-of-the-art manufacturing facilities in close proximity to the OEMs enabling just-in-time delivery schedules, better economies of scale for customers, and logistical advantages. The manufacturing facilities are accredited on quality and safety with world-class certifications like IATF 16949:2016, ISO 9001:2015, ISO 14001:2015, ISO 45001:2018, and OHSAS 18001:2007.

Here’s an overview of the Management Discussion and Analysis (MD&A) section from ASK Automotive’s Annual Report 2023-24, highlighting key themes and topics. 

Management Discussion and Analysis (MD&A) Overview

1. Industry Structure and Development

Global Economy

• The global economy grew at 3.3% in 2023, despite geopolitical headwinds, supply chain disruptions, and inflationary pressures.

• Growth is expected to continue at 3.2% in 2024 and 3.3% in 2025, with central banks likely to ease monetary policies.

Indian Economy

• India became the fifth-largest economy with a GDP of $3.7 trillion (~₹307 lakh crores).

• Projected GDP growth for FY 2024-25 is 7.0%, with inflation expected at 4.5%.

• Government spending on infrastructure and Make in India initiatives is expected to drive economic expansion.

Global Automotive Industry

• Passenger vehicle sales grew by 10% globally in 2023, reaching 75 million units.

• Electric vehicle (EV) sales surged by 30%, with EVs capturing 15% market share.

• China remains the largest automobile market, selling 30.09 million vehicles in 2023, including 4.91 million exports.

• European car sales increased by 18.6%, while North America grew by 15%.

• Indian passenger vehicle sales reached a record 4.9 million units in FY24, growing 7.4% YoY.

Indian Automotive Industry

• The automobile sector contributes 6% to India's GDP, with India being:

• Largest producer of three-wheelers (3W)

• Second-largest producer of two-wheelers (2W)

• Third-largest producer of passenger vehicles (PV)

• Segment-wise growth in FY24:

• Two-Wheelers: 21.43 million units (+9.8% YoY)
• Three-Wheelers: 0.99 million units (+16.1% YoY)
• Passenger Vehicles: 4.89 million units (+7.4% YoY)
• Commercial Vehicles: 1.03 million units (-0.71% YoY)

Aluminium-Based Components Market

• Growing demand for lightweighting and thermal management is driving higher aluminium adoption in vehicles.

• Aluminium content in EVs is 30-50% higher than internal combustion engine (ICE) vehicles.

• ASK Automotive is leveraging Aluminium Lightweighting Precision Solutions (ALPS) to capture opportunities in both domestic and international markets.

2. Opportunities and Threats

Opportunities

• Expansion in the EV sector.
• Growing exports to the EU and North America.
• Diversification into passenger vehicle and commercial vehicle segments.
• Expansion of independent aftermarket channels.
• Investment in new product development and innovation.

Threats

• High competition leading to margin pressures.
• Economic uncertainty due to global geopolitical conflicts.

3. Outlook & Growth Strategy

• ASK Automotive is a market leader in Advanced Braking Systems (ABS) for 2Ws, holding a 50% market share in India.

• Focus on R&D and in-house engineering capabilities for new product development.

• Expansion in Aluminium Lightweighting Precision Solutions (ALPS) to cater to growing EV adoption.

• Strengthening the Safety Control Cables segment, which has grown over 30% in both OEM and aftermarket channels.

• Expansion in overseas markets, with a focus on the US and Europe.

• Establishment of new manufacturing facilities in Karnataka (18th plant) and Rajasthan (Karoli Mega Plant).

4. Financial Performance (Consolidated)

Key Highlights (in Rs. Crores)

Metric	FY 2023-24	FY 2022-23	YoY Growth
Total Income	₹3,005	₹2,566	+17%
Revenue from Operations	₹2,995	₹2,555	+17%
EBITDA	₹311	₹248	+26%
EBITDA Margin	10.4%	9.6%	+80 bps
Profit After Tax (PAT)	₹174	₹123	+41%
PAT Margin	5.8%	4.8%	+100 bps
Earnings Per Share (EPS)	₹8.8	₹6.2	+42%
Debt-to-Equity Ratio	0.42x	0.49x	-14%

5. Segment-Wise Performance (FY24 Revenue in Rs. Crores)

Segment	Revenue	YoY Growth
Advanced Braking Systems (ABS)	₹1,137	+7%
Aluminium Lightweighting (ALPS)	₹1,279	+29%
Safety Control Cables (SCC)	₹121	+36%
EV Segment	₹120	+133%
Exports	₹147	+58%

6. Internal Controls & Risk Management

• ASK Automotive uses SAP HANA for business process automation to ensure financial discipline.

• The company has a robust risk management framework with an independent internal audit function.

• Risk Management Committee monitors economic, regulatory, and competitive risks.

7. Human Resources & Workforce

• 7,000+ employees as of March 31, 2024.

• 500+ hours of training provided for skill development.

• Focus on diversity, employee well-being, and workplace transparency.

8. Corporate Social Responsibility (CSR) & Sustainability

• ₹2.8 Crores spent on CSR initiatives.

• AHSAAS Trust supports education, healthcare, and rural development.

• Investment of ₹48 Crores in a 9.9 MWp solar power plant in Sirsa, Haryana, to transition towards renewable energy.

Conclusion

ASK Automotive delivered strong financial growth in FY24, outperforming the Indian 2W market. The company is focused on expanding EV components, increasing exports, and strengthening its independent aftermarket presence. Investments in R&D, automation, and renewable energy ensure sustainable growth in the coming years.

 

Financial Metrics Discussed in the MD&A Section of ASK Automotive's Annual Report (FY 2023-24)

The Management Discussion and Analysis (MD&A) section of the ASK Automotive Annual Report 2023-24 provides key financial metrics and highlights the trends in revenue, expenses, and profitability. Here’s a summary of the key figures and trends:

1. Revenue Trends

Metric	FY 2023-24	FY 2022-23	YoY Growth
Total Income	₹3,005 Crores	₹2,566 Crores	+17%
Revenue from Operations	₹2,995 Crores	₹2,555 Crores	+17%

Key Trends:

• Revenue grew by 17% YoY, reflecting strong demand across product segments.

• Growth driven by higher domestic demand, increasing EV adoption, and export expansion.

• All major business segments contributed positively to revenue growth.

2. Expense Trends

Metric	FY 2023-24	FY 2022-23	YoY Change
Total Expenses	₹2,791 Crores	₹2,391 Crores	+17%
Cost of Materials Consumed	Not disclosed separately	Not disclosed separately	-

Key Trends:

• Total expenses grew in line with revenue (+17% YoY), indicating stable cost control.

• Raw material costs, employee costs, and operational expenses increased proportionally.

• Investment in capacity expansion (Karoli, Rajasthan & Karnataka plants) led to higher capital expenditure.

3. Profitability Trends

Metric	FY 2023-24	FY 2022-23	YoY Growth
EBITDA	₹311 Crores	₹248 Crores	+26%
EBITDA Margin	10.4%	9.6%	+80 bps
Profit Before Tax (PBT)	₹213 Crores	₹176 Crores	+21%
Profit After Tax (PAT)	₹174 Crores	₹123 Crores	+41%
PAT Margin	5.8%	4.8%	+100 bps
Earnings Per Share (EPS)	₹8.8	₹6.2	+42%

Key Trends:

• EBITDA grew by 26% YoY, supported by operational efficiency and cost optimization.
• EBITDA margin improved by 80 bps, reflecting better product mix and pricing strategy.
• PAT increased by 41%, driven by strong revenue growth and improved margins.
• EPS rose by 42% YoY, enhancing shareholder value.

4. Financial Ratios & Key Performance Indicators

Ratio	FY 2023-24	FY 2022-23	Change
Debt-to-Equity Ratio	0.42x	0.49x	-14%
Return on Net Worth (RoNW)	21.2%	19.1%	+208 bps
Return on Capital Employed (RoCE)	23.6%	22.1%	+150 bps
Interest Coverage Ratio	8.47x	16.7x	-49%

Key Trends:

• Debt-to-equity ratio improved to 0.42x (vs. 0.49x in FY23) due to efficient debt management.
• Higher RoCE (23.6%) and RoNW (21.2%) indicate improved capital efficiency.
• Interest coverage ratio declined from 16.7x to 8.47x due to increased interest expenses.

Summary of Financial Performance Trends

1. Strong revenue growth (+17% YoY), driven by increased demand across Advanced Braking Systems (ABS), Aluminium Lightweighting Precision Solutions (ALPS), and Safety Control Cables (SCC).
2. Stable expense growth (+17% YoY), with cost control measures ensuring profitability improvements.
3. Profitability metrics improved significantly:

• EBITDA margin expanded to 10.4% (+80 bps YoY).
• PAT margin improved to 5.8% (+100 bps YoY).
• EPS grew by 42% YoY, reflecting enhanced shareholder returns.

1. Improved financial health, with lower debt-to-equity ratio (0.42x) and higher returns on capital (RoCE: 23.6%).

ASK Automotive is well-positioned for future growth, leveraging its strong market leadership in 2W braking systems, growing presence in EV components, and increasing global exports.

Risks and Uncertainties Highlighted in ASK Automotive’s MD&A Section

The Management Discussion and Analysis (MD&A) section of ASK Automotive’s Annual Report 2023-24 outlines several risks and uncertainties that could impact the company’s performance and strategic goals. These risks are categorized into business, financial, operational, and regulatory risks, along with management’s approach to mitigating them.

1. Key Risks Identified

1.1. Competitive Risk

• The automotive component industry is highly competitive, with numerous domestic and international players.
• Margin pressures could arise due to pricing competition and customer bargaining power.

Impact on Strategic Goals:

• Could reduce market share if ASK Automotive fails to maintain cost competitiveness.
• To mitigate, the company is investing in R&D and product innovation to differentiate its offerings.

1.2. Economic and Geopolitical Risks

• Global supply chain disruptions, geopolitical conflicts (e.g., Russia-Ukraine war, Middle East tensions), and inflationary pressures can impact input costs and demand.

• Fluctuations in the Indian economy, interest rates, and currency exchange rates could affect operations.

Impact on Strategic Goals:

• May increase raw material costs, affecting profitability.

• Could slow down revenue growth if demand weakens due to economic downturns.

• To mitigate, the company is diversifying its export markets and securing long-term supplier contracts.

1.3. Raw Material Cost Fluctuation Risk

• ASK Automotive relies on key raw materials like aluminium and other metals, whose prices are volatile.

• Inflation in raw material prices could reduce margins if costs cannot be passed on to customers.

Impact on Strategic Goals:

• Can negatively affect EBITDA margins and cash flow management.

• The company is mitigating this risk through long-term supplier partnerships and cost optimization strategies.

1.4. EV Transition Risk

• The shift from internal combustion engine (ICE) vehicles to electric vehicles (EVs) presents both opportunities and threats.

• Some of ASK’s existing products (e.g., braking systems for ICE vehicles) may see reduced demand in the long term.

Impact on Strategic Goals:

• If ASK does not expand its EV component portfolio, it risks losing market relevance.

To mitigate, ASK is investing in Aluminium Lightweighting Precision Solutions (ALPS) for EVs and developing new braking technologies for EVs.

1.5. Regulatory & Compliance Risks

• Changes in environmental, safety, and emission regulations (e.g., Bharat Stage (BS) norms, Corporate Average Fuel Economy (CAFE) standards) could require product redesigns.

• Stricter corporate governance and disclosure norms increase compliance costs.

Impact on Strategic Goals:

• Could lead to higher R&D expenses to comply with regulations.

• Non-compliance could result in penalties or reputational damage.

• ASK is ensuring compliance through internal legal teams and industry partnerships to stay updated on regulatory changes.

1.6. Supply Chain Disruptions Risk

• Delays in raw material supply due to geopolitical issues, pandemics, or logistics bottlenecks could impact production.

• Dependence on specific suppliers poses a risk if they fail to deliver.

Impact on Strategic Goals:

• Could lead to production slowdowns and increased costs.

The company is mitigating this by diversifying suppliers and optimizing inventory management.

1.7. Foreign Exchange Fluctuation Risk

• ASK Automotive exports to over 12 countries and imports raw materials, making it vulnerable to forex fluctuations.
• A depreciating rupee could increase import costs, while a strengthening rupee could reduce export competitiveness.

Impact on Strategic Goals:

• Could affect revenue and cost structure, impacting profitability.
• ASK mitigates this risk through hedging strategies and cost pass-through mechanisms with customers.

1.8. Technology Disruption Risk

• Rapid technological advancements in mobility (e.g., AI, autonomous driving, connected vehicles) may require continuous innovation.

• Failure to adopt new technologies could lead to loss of market share.

Impact on Strategic Goals:

• Could slow market expansion if ASK lags in innovation.

• The company is investing in R&D, digital transformation, and smart manufacturing technologies to stay ahead.
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2. Impact on ASK Automotive’s Strategic Goals

Strategic Goal	Risk Impact	Mitigation Strategy
Market Leadership in 2W Braking Systems	High competition and pricing pressures	Investment in product innovation and differentiation
Expansion in EV Components	Transition risk from ICE to EVs	Focus on Aluminium Lightweighting (ALPS) and EV braking solutions
Export Market Growth	Forex volatility and geopolitical risks	Hedging strategies and market diversification
Operational Efficiency & Cost Control	Rising raw material costs and supply chain issues	Long-term supplier contracts and cost optimization
Regulatory Compliance	Stricter emission & safety norms	Proactive R&D investments and industry collaborations

3. Risk Management Framework

• ASK Automotive has a dedicated Risk Management Committee to identify, assess, and mitigate key risks.

• Uses SAP HANA-based digital risk monitoring systems.

• Conducts regular risk assessments and internal audits.

Conclusion

ASK Automotive is actively addressing risks through innovation, market diversification, operational efficiency, and regulatory compliance. By staying agile in product development and risk management, the company aims to achieve sustainable growth in the evolving automotive industry.

Future Plans and Strategic Goals Outlined in ASK Automotive’s MD&A Section

ASK Automotive has outlined several future plans and strategic goals in the Management Discussion and Analysis (MD&A) section of its Annual Report 2023-24. These strategies focus on business expansion, technology advancement, market diversification, and sustainability initiatives.

1. Key Strategic Goals & Future Plans

1.1. Expansion in the Electric Vehicle (EV) Market

Strategic Goal: Strengthen ASK Automotive’s position in the growing EV sector in India.

Initiatives:

• Increase production of Aluminium Lightweighting Precision Solutions (ALPS), which are critical for EVs.

• Expand product offerings in thermal management solutions, which are in high demand for battery packs and electric motor housing.

• Develop next-generation braking systems optimized for EVs.

• Aim to grow revenue from EV-related products, which already saw 133% YoY growth in FY24 (₹120 Crores revenue).

1.2. Expansion of Manufacturing Capacity

Strategic Goal: Increase production capacity to meet rising demand from OEMs and export markets.

Initiatives:

• New Manufacturing Facility in Karnataka (18th plant):

• Investment of ₹200 Crores.

• Will cater to southern India’s automotive demand.

• Focus on Advanced Braking Systems (ABS) and Aluminium Lightweighting (ALPS).

• Expansion of Mega Manufacturing Plant in Karoli, Rajasthan:

• Investment of ₹380 Crores to scale production.

• Will support exports and new product lines.

1.3. Growth in Export Markets

Strategic Goal: Leverage export opportunities in Europe, North America, and emerging markets.

Initiatives:

• Expand into 12+ international markets where ASK is already present.

• Develop localized products for international OEMs.

• Increase export revenue, which saw 58% YoY growth in FY24 (₹147 Crores revenue).

• Set up a dedicated export desk to drive overseas business.

1.4. Diversification of Product Portfolio

Strategic Goal: Broaden product offerings across Passenger Vehicles (PV), Commercial Vehicles (CV), and Aftermarket segments.

Initiatives:

• Enter High-Pressure Die Cast (HPDC) Alloy Wheel Manufacturing:

• Technical partnership with LIOHO Machine Works Ltd. (Taiwan).

• Leverage HPDC technology, which offers lighter, stronger wheels.

• Strengthen braking systems for 4W and CVs, expanding beyond 2Ws.

• Invest in R&D to develop new braking technologies.

1.5. Strengthening the Independent Aftermarket (IAM) Network

Strategic Goal: Expand ASK’s aftermarket sales and distribution network to drive non-OEM revenues.

Initiatives:

• Joint Venture with AISIN Group (Japan):

• AISIN is a top 10 global Tier-1 automotive supplier.

• ASK will market and sell AISIN’s auto components in India’s Independent Aftermarket (IAM).

• The JV will benefit from ASK’s 400+ dealer network in India.

• Increase direct aftermarket sales, reducing dependence on OEMs.

1.6. Investments in Technology & R&D

Strategic Goal: Strengthen ASK’s in-house design, R&D, and engineering capabilities to stay ahead of competitors.

Initiatives:

• Expand in-house Design Centre & Tool Room to accelerate product development.

• Enhance virtual simulations and CAD capabilities for better prototyping.

• Invest in smart manufacturing technologies (IoT, automation).

• Develop proprietary materials and formulations to improve braking efficiency and durability.

1.7. Sustainability and Renewable Energy Investments

Strategic Goal: Reduce carbon footprint and transition to green energy.
Initiatives:

• Investment of ₹48 Crores in a 9.9 MWp Solar Power Plant in Sirsa, Haryana for captive consumption.

• Shift melting furnaces and paint ovens to Piped Natural Gas (PNG) to reduce carbon emissions.

• Increase recycling and hazardous waste reduction efforts (currently at zero landfill for hazardous waste).

• Develop green mobility solutions to align with India’s EV and carbon-neutrality targets.

2. Expected Business Impact of These Strategies

Strategic Focus Area	Projected Impact
EV Market Expansion	Higher ALPS and braking system sales, increased EV market penetration.
Manufacturing Expansion	Increased production capacity, ability to meet rising domestic and export demand.
Export Market Growth	Greater international presence, revenue diversification.
Product Diversification	Entry into new markets (PV, CV, alloy wheels, thermal management).
Aftermarket Strengthening	Higher non-OEM revenues, reduced dependence on cyclical OEM demand.
Technology & R&D Investments	Enhanced product differentiation, innovation leadership.
Sustainability Initiatives	Lower carbon emissions, cost savings from renewable energy.

Conclusion

ASK Automotive has aggressive expansion and diversification plans aimed at strengthening its market position, entering new segments, and improving operational efficiency. These strategies will help the company capture growth opportunities in the EV space, expand exports, and strengthen aftermarket sales, ensuring long-term profitability and sustainability.

Some significant changes and evolving perspectives at ASK Automotive based on their latest Annual Report (FY 2023-24) versus previous years:

1. Stronger Focus on Electric Vehicles (EVs)

• Current Year (FY 2023-24):

• Major push into the EV sector, with a 133% YoY revenue growth from EV-related products (₹120 Crores).

• Emphasis on Aluminium Lightweighting Precision Solutions (ALPS) for EVs, targeting thermal management and lightweighting.

• New initiatives in EV braking systems and EV-specific components.

• Previous Years:

• EVs were mentioned more cautiously, with a focus on traditional automotive components.

• Less explicit strategic initiatives targeting EV market growth.

**Significant Change: ASK is now aggressively pursuing the EV market, reflecting broader industry trends and regulatory pushes for electric mobility.

2. Manufacturing Capacity Expansion

• Current Year (FY 2023-24):

• New plant in Karnataka (18th plant) with a ₹200 Crore investment.

• Expansion of mega facility in Karoli, Rajasthan with a ₹380 Crore investment.

• Previous Years:

• Emphasis was on optimizing existing capacity and gradual expansion.

• Investments in new facilities were smaller or more focused on specific product lines.

Significant Change: There’s a clear shift toward scaling up operations significantly, likely driven by rising demand, both domestically and internationally, and a need to capture market share.

3. Export Market Growth & Global Expansion

• Current Year (FY 2023-24):

• Focus on increasing exports, which grew by 58% YoY to ₹147 Crores.

• Specific targeting of Europe and North America with localized products.

• Dedicated export desk and strategy for international growth.

• Previous Years:

• Exports were a part of the strategy but not as strongly emphasized.

• Focus was more on domestic market dominance and OEM partnerships.

Significant Change: ASK is increasingly looking beyond Indian borders, aiming to diversify revenue streams and leverage international market opportunities.

4. Product Portfolio Diversification

• Current Year (FY 2023-24):

• New venture into High-Pressure Die Cast (HPDC) Alloy Wheels, leveraging a technical partnership with LIOHO, Taiwan.

• Expansion of product offerings into Passenger Vehicles (PV) and Commercial Vehicles (CV) segments.

• Previous Years:

• Strong focus on 2W Advanced Braking Systems and traditional braking components.

• Less diversification into new vehicle segments or innovative materials like HPDC alloy wheels.

Significant Change: There’s a strategic pivot towards diversifying product lines, likely to reduce dependence on the 2W market and tap into broader automotive opportunities.

5. Sustainability and Renewable Energy Investments

• Current Year (FY 2023-24):

• Big move with a ₹48 Crore investment in a 9.9 MWp solar power plant in Haryana.

• Transition of melting furnaces and paint ovens to Piped Natural Gas (PNG).

• Achieving zero landfill for hazardous waste and significant green initiatives.

• Previous Years:

• Sustainability was noted, but investments were smaller and more incremental.

• Focus was more on efficiency improvements rather than large-scale green energy projects.

Significant Change: ASK is taking bolder steps in sustainability, aligning with global trends towards ESG (Environmental, Social, Governance) priorities and potentially improving their appeal to socially-conscious investors.

6. Strategic Partnerships & JVs

• Current Year (FY 2023-24):

• New Joint Venture with AISIN Group (Japan) to expand aftermarket sales for Passenger Car products.

• Strengthening technical partnerships for advanced materials and EV components.

• Previous Years:

• JVs and partnerships were more focused on technical collaborations for existing product lines (like braking systems).

• Less emphasis on leveraging global partners for market expansion.

Significant Change: ASK is now leveraging partnerships not just for technical support but for market expansion and diversification, signaling a more aggressive global growth strategy.

In Summary:

ASK Automotive’s management is showing a bolder, more aggressive strategy than in past years, with a keen focus on capturing growth from the EV revolution, expanding global footprints, diversifying product offerings, and boosting sustainability efforts. They’re clearly aiming to transform ASK into a more resilient, future-ready company, ready to tackle the evolving auto industry landscape.

Disclaimer: 

Content shared through our blogs are for information and education purposes only and should not be treated as investment or trading advice. Please do your own analysis or take independent professional financial advice before making any investments based on your own personal circumstances. Investment in securities are subject to market risks, please carry out your due diligence before investing. And last but not the least, past performance is not indicative of future returns.

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