In a recent interview with CNBC-TV18, Kuldip Singh Rathee, the Chairman and Managing Director of ASK Automotive, unveiled the company’s ambitious plans to outgrow the industry by at least 5%-7%. ASK Automotive, the leading manufacturer of brakeshoes and advanced braking systems for two-wheelers in India, has initiated a groundbreaking Rs 834-crore public issue, marking a significant step towards achieving this goal. Let’s delve into the insights and strategies shared by Rathee in this interview.
Weathering the Storm: Navigating the Impact of Covid and Commodity Price Fluctuations
Rathee acknowledged that the past two years have been exceptional and characterized by unforeseen challenges. Much of the growth recorded during this period can be attributed to the surge in commodity prices. While the actual growth stands at around 18% and not 28%, it is essential to consider the impact of rising commodity prices on EBITDA margin percentages. ASK Automotive remains focused on delivering a cost-effective solution to its customers. However, when commodity prices rise, it can lead to a slight dip in margin percentages, which Rathee considers an “aberration.”
Strategic Adaptation: Mitigating the Impact of Covid and Commodity Price Swings
Despite the challenges posed by Covid and fluctuating commodity prices, ASK Automotive has taken proactive measures. The company previously relied on quarterly and semi-annual hedges with customers. However, due to a significant spike in commodity prices post-Covid, the company faced losses. ASK Automotive has since revamped its hedging strategy and shifted to a back-to-back arrangement with customers, offering greater stability and protection against price fluctuations.
Market Dominance: A CRISIL-Verified 50% Market Share
In response to a query about ASK Automotive’s market share in the automotive industry, Rathee cited a CRISIL report, confirming that the company commands an impressive 50% share of the Indian market. He also highlighted the company’s distinguished clientele, which includes major two-wheeler manufacturers such as TVS and Honda, among others. ASK Automotive’s products span across three key segments – OEM (Original Equipment Manufacturer), OES (Original Equipment Supplier), and the independent aftermarket, where they hold a significant market share.
Strategic Investments: Expanding Capacities and Diversifying Clientele
When discussing the company’s capital expenditure plans, Rathee revealed that ASK Automotive has already invested Rs 300 crore in a state-of-the-art facility in Rajasthan’s Karoli district. He further clarified that the company does not intend to make any additional capital investments at present. Instead, ASK Automotive has been focusing on expanding its exports business, catering to non-automotive clients.
Rathee emphasized the company’s exceptional asset turnover ratio, standing at approximately 2.5%, which positions ASK Automotive favorably for the next one to one and a half years without requiring additional capital investments. Their commitment to growth extends beyond the automotive sector, as they have successfully ventured into non-automotive domains, securing prestigious clients such as Fortune 100 company Stanley, Black+Decker in the power tools segment, and Polaris in the all-terrain vehicle segment.
In conclusion, under the astute leadership of CMD Kuldip Rathee, ASK Automotive is poised for remarkable growth, strategically adapting to industry challenges, and continuing to dominate the Indian automotive market with a 50% market share. Their focus on efficient operations, proactive hedging strategies, and diversification into non-automotive sectors are sure to make them a force to be reckoned with in the coming years.
