ASK Automotive Limited (ASKAUTOLTD.BO) Q1 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to ASK Automotive Q1 FY '26 Post Results Earnings Conference Call, hosted by Adfactors PR. Please note that this conference is being recorded. I now hand the conference over to Mr. Snighter Albuquerque. Thank you, and over to you, sir.

Thanks, Shubham. A very good evening to everyone, and welcome to the Q1 FY '26 Earnings Call of ASK Automotive Limited. From the senior management, we have with us, Mr. Kuldip Singh Rathee, Chairman and Managing Director; Mr. Prashant Rathee, Whole-Time Director; Mr. Aman Rathee, Whole-Time Director; Mr. Naresh Kumar, Chief Financial Officer; and Mr. Manoj Sharma, Chief General Manager, Investor Relations. Before we begin the earnings call, I would like to mention that some of the statements made during today's call may be forward-looking in nature, and hence, it may involve risks and uncertainties, including those related to the future financials and operating performance of the company. Please bear with us if there's a call dropped during the course of the conference call, we would ensure that the call will be reconnected at the earliest. I would now like to hand over the call to Mr. Kuldip Singh Rathee for his opening remarks. Thank you, and over to you, sir.

Thank you, Mr. Snighter. Good evening, ladies and gentlemen. It is my great pleasure to welcome you all to our Q1 FY '26 earnings conference call. I hope you had the opportunity to review the detailed presentation submitted to the exchanges and available on our website. The global economy in 2025 continues to face significant challenges, including rising trade barriers and increased policy uncertainty, leading to a broad-based slowdown in growth. However, India remains a bright spot with the IMF projecting a robust 6.4% growth for calendar year 2025 despite global disruptions. This positive outlook is further supported by the RBI's cumulative 100 basis points rate cuts over the past 6 months and above normal monsoon and upcoming festive season, all of which are expected to boost sentiment, particularly in the rural economy. This is especially encouraging for the 2-wheeler industry. Now, let me begin by sharing a quick overview of the broader industry as reported by Shyam. The overall performance of the auto industry has remained muted so far with total vehicle production across segments growing by just 1.5%. The 2-wheeler industry's quarter 1 FY '26 production volume was flattish at 5.9 million units, up 0.7% compared to the same period last year. Moving on to the business updates. I'm delighted to share with you that we had a strong finish to the first quarter in both revenue and profitability. This marks our seventh consecutive quarter of robust performance since the company's listing in 2023. During quarter 1 FY '26, we delivered revenue growth of 11.1%. That is excluding the wheel assembly business because wheel assembly strategic direction has been minus 53.5% and thus, consolidated revenue has grown by 3.5% on a year-on-year basis. We achieved growth of 19.3% in EBITDA and 16.3% in PAT on year-on-year basis. We continue to outperform the 2-wheeler industry in terms of vehicle production growth during quarter 1 FY '26. Additionally, we achieved highest quarterly EBITDA margin of 13.8% in quarter 1 FY '26, representing an improvement of 183 basis points over quarter 1 FY '25. Improvement in margins during Q1 FY '26 were mainly driven by better economies of scale due to higher volumes, increasing capacity utilization of Karoli facility, ramp-up of [New] Bangalore facility, continued focus on cost optimization and strategic reduction in low value-added wheel assembly business. 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 2-wheeler industry in FY '26. With this strong performance on profitability, our earnings per share in Q1 FY '26 has increased to INR 3.35 per share against INR 2.88 per share in the same period last year. Despite flattish 2-wheeler industry growth, our all 3 segments delivered a positive growth. We have sustained our market leadership position in the advanced braking system. Our advanced braking system revenue grew by 4% in Q1 on year-on-year basis. The aluminum lightweighting Precision Solutions revenue grew by 15% in Q1 on Y-o-Y basis and the safety control cable revenue also recorded growth of 6% in Q1 on Y-o-Y basis. In the dynamic and unstable global geopolitical environment and the uncertainty caused by U.S.A. tariffs has impacted the overall environment. It has resulted in low demand from our existing export customers. Our revenue from exports was stagnant at INR 33 crores in Q1 FY '26 against INR 33 crores last year in the same period. However, we are still confident that we'll grow the exports at 20% year-on-year during FY '26. I would now like to give you updates that our Bangalore facility, which was commissioned on 14, January 2025. I'm delighted to share that this facility has delivered positive EBITDA in quarter 1 FY '26. This facility is ramping up fast and expected to achieve 60% capacity utilization by quarter 2 FY '26, and this facility will be cash positive in quarter 2 FY '26 itself. At our mega facility at Karoli plant, expansion is going on full swing. Accordingly, capacity utilization is also increasing, and we are currently running at around 65%. Thank you very much for your patient hearing. With this, we leave the floor open for question-and-answers. Thank you very much.

The first question comes from the line of Vijay Pandey from Nuvama Wealth.

Sir, one question I wanted to check about the growth. We had previously guided around mid-teens growth in FY '26. This is organic growth, I mean excluding the vehicle assembly business. That is my understanding. Let me know if this is correct or not. Secondly, our gross margin was much better than last year and also on a quarter-on-quarter basis. Just wanted to check what is driving this growth? Is it primarily coming from the product mix? Are we seeing some -- we saw some tailwind in terms of raw material expenses? How should we look into it? What is the expectation going forward? These will be the 2 questions from my side.

Well, I would like to correct your understanding on the growth -- revenue growth because in our last call also, we had very clearly mentioned, this year, you will see our mid-teens growth in the revenue excluding the wheel assembly business because that constituted about between 7% to 8% of the total revenues. That we had very clearly mentioned in the call. Please throughout the year, in the next quarters also, you see our growth like that. I would like to repeat that. As regards to the mid-teens growth, we are very, very confident though the quarter 1 has not been good for the industry, but as the GDP is growing well, even as per the IMF, I remain an optimist and I feel that we'll be able to achieve the target of the mid-teen growth in revenue this year. As far as your second part is concerned on the margin improvement, that also very clearly, we had mentioned in the last call that 80 basis points, we will improve from 12.2% to 13% just by this wheel assembly business is going because it was a non-profit business. If it is going, so we'll be touching 13%, and we will strive to achieve 13.7% EBITDA margin by all the new plant in Bangalore coming up and a better capacity utilization in the Karoli plant. Both the things have happened as we -- I mentioned just now that even our -- in the quarter 1, our new plant in Bangalore has become EBITDA positive. As we had mentioned in the last call, the Karoli plant was already cash positive. That has all led to the good EBITDA margins.

One more question, sir, just if you can highlight about employee expenses. Employee expenses as percentage of sales it went up. It came at 6%. So just wanted to check if this is because of our ramping up the new plant in -- the plant in Bangalore as well as Rajasthan. Is it because of that? Should we expect it to come down over the coming quarters in the range of 5.5%, 5%?

What is that percentage? Employee expenses, we have not mentioned anywhere. What are you saying that 5%?

Employee benefit expenses as a percentage of sales.

Naresh, this side. Actually, you compare our sale with the apple-to-apple because this time, our sale is lesser because our wheel assembly business is not there, 53.5% is there. Due to that, the percentage seems very high.

In future for our consumption of all in this particular year, I would still like to mention that whatever growth in revenue you see that please add 7% to 8% in that. It is clear the confusion once for all throughout the year.

The next question comes from the line of Naveen Kumar Dubey from Narnolia Financial Services Limited.

Congratulations on decent performance despite the 2-wheeler industry declining. My question is related to 2-wheeler industry only first. Are we seeing any revision in the guidance we had previously given of industry growth, that is 6% to 8%?

Industry growth, well, it is too early to say the quarter 1 has got below expectations. As I say, I remain optimistic, and I feel that the festival season is approaching, maybe we cover up, and monsoon has been good. The good demand should come. I think though yes, today, people -- overall in 2-wheeler segment, they feel that the industry may not grow at 6%. They may grow at about 3% to 4% throughout the year. Anyway, but we expect that we'll still achieve the mid-teens growth. That's what I feel.

Second half should be better?

Yes. Quarter 2 will be better than the quarter 1, much better.

Sir, one question is related to -- have you seen any competitive intensity increasing in advanced braking system because in last 2, 3 quarters, we see this growth percentage is declining?

No. I have always maintained right from the time of my first road show that since we are the leaders for the last 20 years in the country in all the segments, so we'll grow as per the growth of the industry. Ideally, we should have grown only at 1% or 0.7%, but we have grown at 4%. That's all because we a little bit outgrow in the aftermarket.

Sir, any new client addition have you seen recently in last 2, 3 quarters, any new customer addition?

The customers remain the same because we are supplying to each and every 2-wheeler manufacturer. There's no addition possible in the list of customers on the 2-wheeler side.

Product lines increasing, maybe customers not increasing, but new products which are coming from the OEMs that must be increasing.

Yes, please.

Sir, one more question is on -- can we share our top 3 customers' revenue details? I mean, what percentage of sales our top 3 customers contribute?

See, our top customer is the HMSI, the Honda Motorcycle Scooter India. and that constitutes about -- around 35%. The second big customer is TVS, which is now 20%, 21% and the third one is the Hero MotoCorp, which is about 17% or so.

If I see FY '23 revenues breakup, there the top 1 customer was 35%, second one was 16%. I think TVS has taken share from somebody else.

Yes.

The next question comes from the line of Prateek Ladha from Nirmal Bang Institutional Equities.

I had a couple of questions on the wheel assembly business in particular. The remaining part of the business that we were expected to scale down was a quantum of INR 150 crores for this year. What we've seen in the first quarter itself is we've recorded or accrued about INR 50 crores, INR 47 crores to be precise. Is there a faster ramp down that we're seeing of this business that we can probably forecast in our numbers for this year?

No. We had said that this business is about INR 380 crores to INR 400 crores this year and 60% will go, that was the approximation. A business of about INR 240 crores was to go almost. I think we are very much on that path, but even that 40% will go maybe the end of this financial year. If it goes, we'll let you know at least 1 quarter before.

All right, sir. On the new joint venture with TD Holding, so sir, what is the thought process? We've strategically collaborated with a lot of other -- 7 other partners that we have. The thought process on this collaboration and what kind of value will it bring for us as a company?

See, we have signed this joint venture because as I have mentioned many times, we like to have the first-mover advantage in any particular line that we choose. There is no Indian manufacturer producing in India these sunroof cables. That's why we signed with Germany so that we are the first one to produce the cables and then supply to the system.

This would be for the domestic market in particular or well?

First, it will be the domestic market and simultaneously, as the -- to derive the economies, we may export also.

This would just be the electric cable. This won't include the electronic as well.

No. It will only -- this joint venture is only for the cable.

Sir, while the outlook for rural demand is looking strong, the monsoon has been good. MSPs are also where they are. Just trying to understand, even though the first quarter was subdued, what -- based on your interactions with customers, what the outlook is on the festive and thereafter? Are we expected to see some sort of a recovery going forward? Or would it be more gradual in nature?

I always, as I said, remain optimistic. After Ganesh Chaturthi, normally, what we have seen till Diwali, there is a big boost in demand, and I'm still hopeful and optimistic that it will come. That's my understanding.

Just to understand from the month of July itself, because we're at the end of July to understand what the production schedules and if you can give any color, I'm not asking for anything specific on customers.

No. I strongly feel the sudden spur if it comes, it will come in September only, month of September.

Because Navratri is at the end of September and Diwali is in --

Diwali is in October. I think September and October will be very good. This is what we have seen for the last 30 years, more than 30 years. I strongly feel that it will remain like that.

Sir, and you mentioned, you guided for a 20% growth in our exports, which we are looking for FY '26. Is this particularly from the non-auto business that is looking to ramp up? We've seen that ramp up significantly, especially in the Q1 as well. We've seen about 48% increase in the non-auto business. Is it largely from that? Or are there any other new products that we've made and we've developed and we're going to be supplying those?

Exports, I have said that the market -- export market is in the current geopolitical situation is still not very stable, and there is a big confusion on the tariff front. Our U.S. exports are not picking up, and that's what I mentioned that we may not achieve the -- our own very ambitious targets, which we had mentioned in the last call, but still hopeful to have a 20% growth in the exports from last year.

The next question comes from the line of Smit Shah from Monarch Networth Capital Limited.

Congratulations on a good set of numbers despite the challenging environment. Sir, my question is regarding the alloy wheel. Is there any update on the testing completion and whether we have received any confirmed orders?

No, alloy wheel, still the testing is going on. In the last call also, we said that before -- I think H2 ends, we should know something. I'm quite hopeful that the supply should start in H2 because there is no other news at the moment. This is the status on the -- our collaboration with LIOHO, Taiwan, where the tests are going on. On about the status of the other collaboration with Japan, now in Karoli this year, we have already ordered the machines. The investments have almost been done. The advances given, and we hope to receive the machines by December, and in January, the sample should come and get tested so that we can start supplies in the next financial year.

Sir, question is also on the front of the new JV that we have done on the sunroof cables. Sir, can you put some color on the opportunity size that we have?

See, it was not a question of opportunity. There are 2 thoughts were involved when we signed the joint venture. Number one, I like to be one of the first ones to do the import substitution. All these cables are being imported at the moment. We'll be the first one to produce in the country. I think that gives me a lot of satisfaction, number one. Number two, more-and-more passenger vehicles are now getting the sunroof. They are coming with the sunroof. This business will slowly, slowly keep on growing. Third thing, if I'm confident that with our best quality that we'll be able to export also in future.

Sir, but any number on the market size as such?

Number we have calculated. It will not be a big number, but still it will be very prestigious. Good part is that all the sale will be to the passenger vehicle segment where we are not there much.

In terms of capacity, do we have to put up any capacity? When do we expect the revenues coming in from this?

The revenue should come in our opinion, in the next financial year only because I feel we should put up the capacity by the end of this current financial year.

Sir, how much are we investing for this?

Not much. Not much because some of the things are very common with our existing business. Then we will be investing around INR 10 crores this year. We have the land, we have the building, everything we have.

Sir, last question being on the CapEx front. What would be the CapEx for this year and the next year?

This year, we have already announced that we'll be investing INR 450 crores, and that's going on as per the plan. This CapEx will ensure that we complete the -- we are ready for supplies for the next 18 months. The whole of FY '27 is sorted. As regards the CapEx next year is concerned, that will be announced in the due course of time. But the good part, I may announce again that in spite of investing INR 450 crores, we'll be having a better debt equity ratio, and that will get slightly improved. That's what we target.

The next question comes from the line of Sagar Shetty from BP Wealth.

Congratulations on a good set of numbers. I just wanted to know that given the regulatory acceleration of the government acceleration of ABS adoption across 2-wheeler models and while we specialize largely in brake shoe in the ABS segment. How do we -- how are we assessing the -- are we seeing that as a headwind? How are we planning to assess those headwinds? How are we planning -- is there any strategic initiative you are planning to take in due course?

See, this is a sudden draft notification that everyone received from the government. Nobody was mentally prepared for it. There are not very many suppliers of ABS in the country and neither do they have the full capacities. All our OE customers, they have -- through CM, they have represented to the government that it is not possible. Since it was a draft notification, I think we are waiting to see the results of what the discussions take place. Only after the discussions that -- after the -- when the final notification comes maybe in a month or 2, then only we'll come to know what the current -- what the situation -- exact situation is there.

We are not planning for like -- do we have any plan to expand our disc brake segment or?

See, point is the ABS current capacities of the manufacturers is hardly 10% to 15% of the total requirement. That's what we could understand in interaction with our customers. They have to gear up. How fast they gear up, what will be the quantum of the business that gets generated. But the good part is after the draft notification, even we have opened discussions with some of the players that what best we can do, what new opportunities we can encash on. Of course, there will be some -- if it is implemented in total, some headwinds will be there for us, but then we will compensate through some other new opportunities in the new setup.

The next question comes from the line of Suvaan Mittal from MFC.

I mainly have 2 questions lined up. First being in the last con call, we had guided for the Bangalore facility to reach anywhere between 60% to 70% capacity utilization by end of this quarter of FY '26. We're already projecting to reach by 60% in Q2. By Q4, could we reaffirm that we should reach 70% or at least cross 70%?

Yes, you are right. This is -- we are lucky that it's already in Q2, we'll reach 60% capacity utilization. Now I would like to revise the guidance that in Q4, we'll be at 70% to 75%. Yes, you are right.

Where do you see the main growth coming from, sir, from the aluminum Precision business or the ABS business?

That plant is only aluminum, aluminum castings with machine.

Sir, second question being on a more long-term perspective, as we have major CapEx is planned for the coming 3, 4 years at the Karoli facility in Bangalore facility. You had also mentioned, we'll also be investing in a new next plant in Gujarat, Bangalore in this FY. We'll be having significant operating leverage. Over a long term but sort of 3 to 4 years, in what kind of a term could you see the operating leverage to maximize out? If you could give some color on what kind of road map we set for us for the company?

The operating leverage once the plant gets commissioned and it reaches 60%, 70%, we almost start getting the full operating leverage. All our plants are doing so well because these last 2 plants, when they have become cash -- they'll become cash positive, then I think we'll be deriving very good operating leverage right from the next quarter. But there is a slight -- a little bit because when the very new plant comes, it takes time. That all other plants, they run at full capacity, almost full capacity.

The next question comes from the line of Vijay Pandey from Nuvama Wealth.

I just wanted to check if you can share the detail about what will be our revenue expectation from Bangalore and from Karoli plant, like in order to model the operating leverage growth from these 2 plants? If you can just share not exact number, but even in terms of percentage or range, that will be very helpful.

No. See, our asset turnover in the new plants is 1.75. Our only target is to achieve that. That's what I can tell you.

1.75 for both Karoli as well as Bangalore?

Yes. We have invested INR 490 crores in Karoli. Here, we'll be -- we have last -- till March, we had invested INR 155 crores and now further, we'll be investing about INR 75 crores to INR 100 crores more. You can imagine that is the -- and 1.75 we have to -- we should achieve. Maybe I'm not saying this FY, but of course, certainly next financial year.

The next question comes from the line of Nitin from JM Financial.

Coming back to ABS thing, assuming that ABS is implemented as in total, what would be the impact in terms of number that we are going to have on our financials? If you could throw some color on that?

See, Nitin, this is a very hypothetical question that if it is -- because there are no suppliers who can supply in total. We would like to wait and watch to comment. However, if you really want to know the numbers, the total headwinds are about INR 230 crores, which are very nominal and they are into the aluminum segment. As I said, that this is the extreme headwind whenever it comes and how many years it comes, and there will be new opportunities, which we will explore and encash. It's very difficult to give that number. I've told you the worst number.

Yes. That's for the entire year, that is what the impact that we can have like INR 230 crores a year.

That is the maximum. That is the maximum. If it is implemented 100% in total, which we are -- because all the OEMs are representing, there are only 3 suppliers in the country of ABS, and they don't have their own capacities. When they don't have the capacity to supply, how will the manufacturing take place. Maybe I can't say at this moment. That's why I repeatedly say, let the final notification come. Maybe in the next quarterly call, we'll have a visibility, and we'll be able to answer much better.

The next question comes from the line of Manish from MNCL.

Congratulations on a good set of numbers, sir. Basically, my question relates to the previous participant that if the regulation gets implemented, so from a long-term point of view, how do we see ourselves positioning here? If we have any plans to venture into anti-braking systems? How do we intend to mitigate this?

That's what I said, please let the notification come. I'll answer all your questions in the next call because by that time, I'm very sure the final notification will come. We'll study it thoroughly, and since we have already done 8 collaborations cum joint ventures, 5 collaborations and 3 joint ventures. if it is implemented in total, certainly, we'll be looking for some new joint ventures or collaborations.

A follow-up on that question. Is the aftermarket growing faster than the OEMs in the advanced braking for us?

Yes. It is growing much faster. This quarter, we have grown in double digit.

My second question is regarding any new components addition that you're working on the aluminum business side?

We keep on doing. A lot of RFQs always remain in the pipeline. We keep on developing new components. That's an ongoing process, and that is why this segment is growing at 15%. In spite of the industry growing at 0.7%.

As there are no further questions from the participants, I now hand the conference over to Mr. Kuldip Singh Rathi from ASK Automotive Limited for closing comments. Please go ahead.

Thank you, everyone, for being with us and having such a patient attendance and listening. Thank you for contributing to our thought processes with your very intuitive questions, and we are very grateful. In the end, I would only like to say one thing that our revenue guidance of mid-teens is intact for this financial year in spite of the sector not doing well. Our EBITDA margin, what we have achieved, we will certainly maintain it. I again reiterate. I feel the year is going to be good. Thank you very much.

Thank you. On behalf of Adfactors PR, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.