ASK Automotive IPO: First-Day Response Falls Short with Only 38% Subscription
ASK Automotive IPO
ASK Automotive IPO Receives a Lukewarm Response on Debut
On November 7, ASK Automotive Pvt. Ltd., a Gurugram-based manufacturer specializing in brake shoes and advanced braking systems for two-wheelers in India, launched its Initial Public Offering (IPO) with aspirations of a successful public market entry.
However, the initial response from investors was notably lukewarm, with the IPO receiving subscriptions for only 38% of the available shares on the very first day of its offering. This article delves into the details of the ASK
Automotive IPO, the factors contributing to its tepid reception, and an in-depth look at the company’s operations, its significance in the industry, and its plans for the future.
IPO Subscription Statistics
The IPO subscription statistics provide a clear indication of how investors perceived the ASK Automotive IPO during its debut. On the first day of the offering, the issue managed to secure subscriptions for a mere 38% of the shares on offer.
Out of a total of 2.06 crore shares available, investors submitted bids for only 79.16 lakh shares, reflecting subdued interest.
The IPO was priced within a range of Rs 268 to Rs 282 per share, with the company aiming to raise Rs 833.91 crore at the higher end of the price band. Investors had an opportunity to participate in this offering until November 9.
Subscription Breakdown
To understand the investor sentiment in more detail, let’s break down the subscription figures by investor category:
- Qualified Institutional Buyers (QIB): QIBs, including financial institutions and mutual funds, subscribed to a mere 3% of the shares. This limited participation from institutional investors was a significant factor contributing to the lukewarm response.
- Non-Institutional Investors: Non-institutional investors displayed a relatively stronger interest, with a subscription rate of 41%. This category typically includes high-net-worth individuals who invest in IPOs.
- Retail Investors: The most substantial interest came from retail investors, with a subscription rate of 57%. Retail investors, often individual investors, displayed a relatively more positive sentiment towards the IPO.
In summary, despite a more robust interest from retail investors, the overall subscription rate remained at 38%, reflecting lukewarm enthusiasm from the investor community.
Key Details of the IPO
The structure of the ASK Automotive IPO is distinctive in that it is exclusively an Offer for Sale (OFS). In an OFS, existing shareholders, in this case, promoters Kuldeep Singh Rathi and Vijay Rathi, offer their shares to the public.
The IPO featured 2,95,71,390 equity shares made available for sale.
At the time of the IPO, Kuldeep Singh Rathi held a 41.33% stake in ASK Automotive, while Vijay Rathi held 32.3%.
Consequently, the funds raised from the IPO went to the shareholders selling their shares rather than the company itself.
This structure can sometimes impact the level of investor interest, as it does not directly contribute to the company’s capital for growth and expansion.
The allocation of shares in the IPO was divided as follows:
- Qualified Institutional Buyers (QIBs) had 50% of the shares reserved for them.
- High Net Worth Individuals (HNIs) had access to 15% of the shares.
- Retail investors had the largest allocation with 35% of the shares reserved for them.
Investors were permitted to place bids in lots of 53 shares, adhering to the regulatory norms.
About ASK Automotive
ASK Automotive Pvt. Ltd. is headquartered in Gurugram, Haryana, and has established itself as one of India’s leading manufacturers of brake shoes and advanced braking (AB) systems for two-wheelers.
The company has made a significant mark in the industry, boasting approximately 50% of the market share in terms of production volumes and branded independent aftermarket products for original equipment manufacturers (OEMs) during the fiscal year 2023.
One of ASK Automotive’s distinguishing features is its comprehensive approach to the industry. The company not only manufactures brake components but also supplies security systems and critical engineering solutions. ASK Automotive’s capabilities extend to in-house designing, development, and manufacturing, giving them a competitive edge in delivering high-quality products to their clients.
The company’s customer base is a testament to its standing in the industry, counting prominent names such as TVS Motor Company Limited, Hero MotoCorp, Greaves Electric Mobility, Bajaj Auto, and many more among its clients.
ASK Automotive operates 15 manufacturing facilities across five states in India, ensuring efficient production and delivery of its products.
The Journey to IPO Approval
The journey to conducting an IPO involves several critical stages, and ASK Automotive initiated this process by seeking approval from the market regulator, the Securities and Exchange Board of India (SEBI), between June and August.
The company’s application for an IPO was approved by SEBI in mid-October, paving the way for the IPO to go forward as planned.
Factors Contributing to the Lukewarm Response
Several factors could have contributed to the lukewarm response to the ASK Automotive IPO:
- Market Conditions: The overall sentiment and market conditions during the IPO launch period play a significant role in investor enthusiasm. Market volatility or uncertainty can impact investor participation.
- Offer for Sale (OFS) Structure: The OFS structure, where existing shareholders are selling their shares without capital infusion into the company, can sometimes deter investors looking for companies seeking capital for expansion.
- Promoter Stake: The fact that the promoters still retain a significant stake in the company may have influenced investor perceptions. In this case, Kuldeep Singh Rathi and Vijay Rathi collectively held a substantial ownership stake.
- Competitive Landscape: The two-wheeler industry is competitive, and investor sentiment can also be influenced by factors such as market dynamics, competition, and economic conditions.
- Valuation and Pricing: The pricing of the IPO within the range of Rs 268 to Rs 282 per share may have played a role. The perceived value of the shares relative to the pricing range can impact investor decisions.
The Significance of ASK Automotive in the Industry
ASK Automotive holds a significant position in the Indian two-wheeler industry, particularly in the area of brake components and advanced braking systems.
Its 50% market share in production volumes and branded independent aftermarket for OEMs in FY23 highlights its dominance in the sector. This dominance is further accentuated by its extensive in-house capabilities, including design, development, and manufacturing.
The company’s product portfolio not only includes brake shoes but also advanced braking (AB) systems. These systems are crucial for enhancing safety and performance in two-wheelers, an area of paramount importance in the Indian market.
ASK Automotive’s diverse clientele includes some of the most well-known names in the industry, such as TVS Motor Company Limited, Hero MotoCorp, Greaves Electric Mobility, Bajaj Auto, and many more. This broad client base underscores the trust and reliance placed in ASK Automotive’s products.
Operating 15 manufacturing facilities across five Indian states, the company ensures efficient production and timely delivery to meet the demands of its clients.
Final Remarks
The ASK Automotive IPO’s lukewarm reception on its first day of offering raises questions about the factors influencing investor sentiment and the broader market environment.
The IPO’s Offer for Sale structure, coupled with the pricing and valuation considerations, may have contributed to the subdued response.
However, it’s important to note that investor sentiment can evolve over the course of an IPO’s subscription period, and the final outcome may differ from the initial response.
Additionally, ASK Automotive’s significance in the two-wheeler industry and its esteemed clientele indicate its strong market position, which could appeal to investors seeking long-term prospects.
As the IPO subscription period extends until November 9, it remains to be seen whether the investor sentiment will change, and the overall response to the ASK Automotive IPO will strengthen.
Regardless of the initial response, the company’s achievements and position in the industry signify its importance and potential for growth in the Indian two-wheeler market.
