ASK Automotive Limited ($ASKAUTOLTD)

Ladies and gentlemen, good day, and welcome to ASK Automotive Q4 and FY '26 Post Results Earnings Conference Call hosted by Adfactors PR. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rushabh Shah from Adfactors PR. Thank you, and over to you, sir.

Thank you. A very good evening to everyone, and warm welcome to the Q4 and 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, Joint Managing Director; Mr. Aman Rathee, Joint Managing Director; and Mr. Naresh Kumar Sharma, Chief Financial Officer. 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 future financials and operating performance of the company. Please bear with us if there are any call drops during the course of the conference call, we would ensure the call is reconnected at the earliest. I now hand over the call to Mr. Kuldip Singh Rathee, Chairman and Managing Director, for his opening remarks. Thank you, and over to you, sir.

Thank you, Mr. Rushabh. Good evening, ladies and gentlemen. It's my great pleasure to welcome you all to our Q4 and FY '26 earnings conference call. I hope you have had the opportunity to review the detailed presentation submitted to the exchanges and available on our website. In FY '26, Indian economy remained resilient and stands as the world's fastest-growing major economy. As per RBI's recent estimate, the GDP is expected to attain an impressive growth rate of 7.6%. This momentum is driven largely by robust domestic demand, resilient private consumption, strong investment in infrastructure and enabling government policies. The Government of India's GST 2.0 reforms marks a pivotal milestone that is driving structural shift in the growth momentum across the Indian automobile industry and has energized the broader economy given the sector's deep forward and backward linkages. GST 2.0 is being a structural reform, the benefit of which will accrue over a long period of time. After February 28, 2026, geopolitical conflict in West Asia has disrupted the global economy, posing an unprecedented challenge in supply chain, creating undue volatility in energy, commodity and currency across the globe, and it has started affecting Indian economy as well. The phenomenal increase in Aluminum Alloy Prices, in particular, have affected our industry. Despite these challenges, we are optimistic that the growth momentum will remain in the coming quarters. Now let me begin by sharing a quick overview of the broader industry as reported by [indiscernible]. The Indian automobile sector witnessed healthy momentum in FY '26 with overall vehicle production across all segments registering a robust year-on-year growth of 11.8%. The 2 Wheeler segment matched the overall vehicle production growth at 11.8% on year-on-year basis. The 2 Wheeler industry closed FY '26 with a strong production volume of 26.7 million units, up from 23.9 million units in FY '25. In Q4 alone, production touched 7 million units as compared to 5.8 million in the same quarter last year. I'm happy to share that this year, the 2 Wheeler industry production volumes have surpassed the previous peak of FY '19. Looking ahead, we believe that the industry will continue to gain from the far-reaching macroeconomic policy reforms undertaken by the government, particularly GST 2.0 reforms, personal income tax rationalization announced in the Union Budget '25-'26, successive rate cuts and liquidity enhancement measures by the Reserve Bank of India. These have positively impacted consumer purchasing power and improved access to vehicle financing created a conducive environment for sustained demand. Rising rural income will also be beneficial for the 2-wheeler sector. since all our products were under the category of 28% GST, hence, the reduction of GST rate from 28% to 18% is helping us to outgrow in the Indian aftermarket and capture more market share from gray market operators and duplicators. Happy to share that our independent aftermarket has grown by 24.7% in FY '26. We still remain optimistic that the geopolitical situation shall normalize soon and the growth trajectory of our sector shall be maintained. Before we move on to ASK's business performance, we would like to highlight that on the green energy front, as already shared with you earlier, I'm happy to update that our 9.9 megawatt solar plant at Sirsa Haryana has been fully operational since April 2025 and is delivering the sustainable operational economies on the expected lines. Our second captive solar plant of 11.55 megawatt at Bikaner, Rajasthan is progressing well and is expected to be commissioned in quarter 2 FY '27. This reflects EST's special focus on green energy. Moving on to our business updates. I'm delighted to share with you that we had a strong performance in the fourth quarter and full year in both revenue and profitability. This is the 10th consecutive quarter of robust performance by us since listing of the company. As already shared in the previous con call that our EBITDA margin gets affected due to volatility in the Aluminum prices because of the denominator effect. We delivered strong performance in Q4 FY '26 in business and recorded consolidated revenue growth of 35.3%. Excluding pass-through impact of significant increase in aluminum prices on revenue, which was 8% and wheel assembly business strategy reduction, which was negative 2.7% overall, our net revenue has grown by 30% on a year-on-year basis. We achieved EBITDA of INR 140 crores with 31.1% year-on-year growth. EBITDA margin at 12.1% However, -- this EBITDA percentage was impacted due to pass-through Alloy Prices, as mentioned earlier. But for this impact, EBITDA percentage would have been higher by 80 basis points. achieved PAT of INR 72 crores with 24.2% year-on-year growth. EPS increased to INR 3.63 against INR 2.92 in last year in the same period, up 24.2% year-on-year. As regards to our annual results for FY '26, we delivered consolidated revenue growth of 16.2%. Excluding pass-through impact of significant increase in Alloy Prices on revenue, is 3.1% and impact of wheel assembly business strategic reduction that is 7% overall net revenue has grown by 20.1% on a year-on-year basis. Happy to share that again, we have outperformed the 2 Wheeler industry production growth of FY '26. Achieved EBITDA of INR 551 crores with 24.1% year-on-year growth. EBITDA margin at 13.1%. However, EBITDA percentage was impacted due to pass-through Alloy Prices. But for this impact, EBITDA percentage would have been higher by 40 basis points. This reflects the result of our continued focus on expanding value-added businesses, improving utilization of production capacities and bringing cost efficiencies. Our aim is to sustain current level of EBITDA margins and continue our efforts to improve gradually in the subsequent quarters, depending upon the growth of the 2 Wheeler industry and geopolitical environment. With strong performance, our earnings per share has increased to INR 15.08 per share against INR 12.56 per share in the last year same period. Our all three product segments performed well and surpassed the industry growth of 11.8% in FY '26 in terms of revenue growth. We have sustained our market leadership position in the Advanced Braking System. Our Advanced Braking System revenue grew by 32% in Q4 and 17% in FY '26 on year-on-year basis. The Aluminum Lightweighting Precision Solutions revenue grew by 47% in Q4 and 30% in FY '26 on year-on-year basis. The Safety Control Cable revenue also recorded growth of 26% in Q4 and 14% in FY '26 on year-on-year basis. Our revenue from exports were at INR 141 crores in FY '26 against INR 147 crores last year. Because of the trade disruptions due to higher tariff rates, geopolitical tensions, supply chain issues, logistic costs and other bottlenecks, we could not achieve our target on the export front. We have delivered strong returns in FY '26 with ROAC at 26.9% and ROE at 25.3%. The Board has recommended a dividend of 92.5%, that is INR 1.85 per equity share of face value of INR 2 each. Another key update. Strategic reduction in low-margin wheel assembly business is now complete. And from 1st April 2026, wheel assembly revenue will be -- on year-on-year comparison in FY '27 also, our real growth will be 4% higher than the published growth on a year-on-year basis. Recent developments in geopolitical scenario and significant increase in minimum wages by some of the state governments has created an input cost pressure on the industry. The customers have been requested to support, and we are confident that all our prestigious OEMs will compensate this input cost escalation. We also remain optimistic on the medium-term industry outlook supported by improving consumer sentiment, expected benefits from the commission and continued policy support for manufacturing and formalization through labour reforms. These structural developments provide greater confidence in India's long-term consumption and manufacturing growth trajectory. We are confident that we will continue to grow around mid-teens in FY '27. Thank you very much for your patience. With this, we leave the floor open for question.

[Operator Instructions] The first question is from line of Ankit from IIFL.

I just wanted to know if there is any deficiency in margins other than the already called out 80 bps impact of pass-through of Alloy Prices in 4Q FY '26?

So, there is only difference is because the Alloy Prices shot up through the roof and especially they rose about 10% in the March itself. That's why the whole Q4 margins were affected. Plus because of the abrupt increase in March in the Aluminum prices, some of the Aluminum rise could not be passed on, especially in the aftermarket. And there was a conscious loss of by us of INR 5 crores because every day, we cannot increase the prices and the prices were rising actually every day. But everything has been corrected April onwards. And all these Aluminum price rises, which has happened in April also, they have been passed on to the customer, both on the aftermarket front as well as to our OEM customers.

Okay. So how much would be the price hike in April?

Price hike of what Aluminum.

Yes.

Aluminum is abrupt. It has risen from INR 285 to even INR 365 the price, but the price has been given by the customer. in April, we have also increased the prices in the aftermarket. And we said that whatever rise happens because it's such a volatile situation that we need to pass it on now. But in the month of March, frankly, neither we expected the prices to go up on a day-to-day basis and nor everybody as an optimist was expecting that the bar will end soon, which, of course, is prolonging at the moment.

Yes. Got it. And just another housekeeping question. Can you share what was the utilization at the Bangalore and Karoli plant?

Very, very happy to share that Bangalore, we have reached 90% capacity utilization in the last plant that we set up last year, our 18th plant and the third plant in Bangalore. So the Bangalore, all capacities are full now. In the Karoli plant, the capacity utilization is still 65%. That the reason for that is we have made investments for the Alloy Wheels. And the Alloy Wheel supplies will -- as I said, they will supply to the Japanese customer in H2, beginning of the H2. So this current year, you will see much higher capacity utilization in the Karoli plant also.

The next question is from the line of Nitin Agarwal from JM Financial.

Just wanted to understand your outlook for FY '27 for the underlying industry. So where do we see FY '27 for 2 Wheeler industry production volume growth? Any sense are we seeing any production cut by the OEMs given the challenges that we are facing in terms of exports and the freight rate? And secondly, on the margin, where do we see the margin going forward given the denominator impact is going to be there as we have indicated that we have taken the price hike in April also. So what could be the steady state margin guidance from your end?

See, as far as outlook of the 2 Wheeler industry is concerned, our -- all our OEM customers, they are carrying on with their [ original ] production schedules which shows a nice growth in this year also. And none of these supplies have been affected by the raw materials or anything. And as I said that we have passed on the Aluminum price increase impact. So last year, we -- overall, we achieved an EBITDA margin of 13.1%. And except for the denominator factor, we will be able to maintain that EBITDA margin. Because if the Aluminum prices are shot through the roof, then our EBITDA margin will look less. because of the higher Aluminum prices, but the absolute numbers, what we have planned in the next financial year will remain the same.

Okay. And one more question with regards to ABS implementation. We don't see anything. Do you hear anything or any update out there if it is going to be implemented or.

We are not aware of anything. And after that, nothing has come.

The next question is from the line of Rahul Kumar from Nuvama.

Congrats on strong quarter. Sir, on the independent aftermarket segment, it has grown by 25% year-on-year in FY '26. So what has driven the strong growth? And how do you see the outlook for this segment in FY '27?

See, I have been explaining right from beginning in each and every quarter that we were suffering on the GST front in the independent aftermarket because of the 28% GST. The government was kind enough to revise it to 18% in GST 2.0. And as soon as it was revised, our sales in the independent aftermarket shot up because we could dismatch some share of the gray market operators and the duplicators from in the aftermarket. So that's how this stupendous growth, and we do feel that this year also we'll be maintaining a good growth in the independent aftermarket.

On the second question, how do you see the export outlook for FY '27? And on the food order, can you talk about the execution time line and also if there are any new order wins that can support export growth ahead?

See, this year, we are very confident of growing at 20%. Of course, provided the geopolitical situation remains reasonable, which we are as an optimist, which we feel that it shall be sorted out soon rather than late. So if it is sorted out, we have the orders in hand, and we are definitely going to grow at 20%.

Okay. lastly, on FY '27 CapEx plan, what would be the CapEx for FY '27? And are there any plans on new investments which can help in launching new products in FY '27?

So the products that are going to be served to the customers, we have already invested because we go one year in advance. But for next year growth of mid-teens, we need to invest around INR 400 crores, which we shall be investing in this year also. And all this internal accruals free cash will be put back in the company. And so we will see to it even the debt levels are contained within the limits.

And sir, lastly, on, what is the revenue expectation for FY '27 and '28?

FY '27, we are expecting revenue of around INR 90 crores, INR 100 crores. And FY '28 will be about INR 220 crores.

The next question is from the line of [ Mrunmaye Jogalkar ] From [indiscernible] Mehta Investment Intermediaries.

Sir, firstly, I wanted to ask that in Q1 so far, have we faced any production disruptions as such?

No, we have not faced any disruption in the production side. Even the orders from the customers are also robust.

Okay. Great, sir. And sir, you touched upon the fact that the employee costs have been inching up and you are in negotiations with the customer. But any -- can you quantify by how much have the costs increased and any time line as to when you expect some pass-through to happen on that side?

So see, whatever the Aluminum prices, the customer is already compensating us. As far as regarding the wages, everybody knows the government has increased the wages and whatever the government wages increases, it's always compensated by the customers. So we don't see the margin pressure on that side. Of course, maybe the customers will need to increase the prices of the vehicle by some percentage.

But we might see the impact of that in Q1 at least and then probably with the lag, the benefit.

No. There's hardly any impact because the wage increase, what I feel optimistically, the money remains in the country only. We give more wages to the workers in that class, and they have more buying capacity because more money in their hands. So -- and if the price increase by INR 1,000, INR 2,000, it should not make a difference to the overall sales in the sector.

Got it, sir. And sir, a slightly probably medium-term question, like with rise in alloy prices, it could be just a near-term impact. But then does it become a tougher conversation to probably increase our wallet share in the A segment or for the Alloy Wheel business?

No, content it will not increase the content you are asking. So the content will not matter. Only thing is sometimes as we clearly mentioned, this year also, we are very transparent in our reporting that our overall revenue in the quarter looked 8% more sales growth. But that was only Aluminum price increase, nothing else. But then also we talk -- we also talk of the real net growth every quarter and every year.

From the OEM side, does it become a conversation whether to go for Aluminum or to stick with steel for certain component because of the price differential?

So 2 Wheeler segment, there is no such conversation until now.

[Operator Instructions] The next question is from the line of Michael [indiscernible] from [indiscernible].

Could you please give me your thoughts on what would happen if the monsoon is deficient this year? Given your sensitivity to the 2 Wheeler industry, we could expect some weakness versus your expectations? Or has that not historically been the case for you?

This monsoon, if it is deficient, it certainly affects the agriculture income that everyone knows, but we can't quantify the impact that it will have at the time come. And many of the times, the forecast have been reversed also. And because last two years also, they were saying [indiscernible] Factor, which never happened. And maybe the government increases the MSP prices of the farmers' crop and they get duly compensated because of that.

And last time there was a deficient monsoon, was there a material impact on your business or not really?

I think not in this. Maybe we'll see what happens next year, but this year seems to be good.

Sir, I'm not clear. Last time there was a bad monsoon, what happened to your sales?

Last time when was the Sir, we don't clearly remember. Sorry, I don't want to give a wrong data to you, but I don't think we were much impacted because we got impacted -- yes, 2 Wheeler sector got impacted only when COVID came -- so that was the big impact. Before that till '18, '19, we don't even remember. And after that, there has not been any deficient monsoon.

As there are no further questions. [Operator Instructions] The next question is from the line of Rishi Kapadia from CLSA.

Congratulations for such good set of results. I have two questions. One is, let's assume that government comes up with a mandate of [ EDS ], but it is still fair to assume that majority of our sales in the braking system is through independent aftermarket and OEs. So the impact would be relatively lesser for us considering we are not directly selling majority of our sales to the new vehicles and catering major to the population of 2 Wheelers on road. That's one. Second, if I look at the 2 Wheeler-EV revenue for us it is more or less growing at high single digit in FY '26. Is that correct? And if yes, versus the EV volume growth for the industry, it is relatively lower. So anything to kind of call out there?

I'll take your second question first. The EV segment is growing still at single digit, and we are also growing with the EV segment. As you are aware, we are OE to almost every EV manufacturer in the country, so EV OEMs. So we are supplying to them, and so we are growing as they are growing. And our -- one of the major customers has grown less in this last year, which is Ola, that was our quite a major customer. So -- but still, we have taken the other customers and good share in that, and we are growing. So if the EV sector now grows further in double digit, we'll also grow in the double digit. So that's the first question. Regarding the first question, I think that's a very hypothetical question, and I'm sorry, I can't answer on that.

The next question is from the line of Yash Agarwal from Nirmal Bang.

I just wanted to know your CapEx outlook for FY '27.

FY '27, we'll be spending about INR 400 crores.

And what will be the breakup of the CapEx?

CapEx breakup is very little is the maintenance budget. That's about INR 40 crores, INR 50 crores. The rest is all the CapEx for the new plant capacities, which we keep on adding.

And one bookkeeping question, like the working capital is negative in the FY '26. Any particular reason why it was so negative what was the key item driving that?

Naresh this side. This is due to sudden increase in aluminum prices in the month of March and the impact on the balance sheet date. That's why it's looking like that because the pricing to the customers take time to pass on in the terms of NYC. So there is increase in debtor share in receivable share. And I think that is the only reason.

Okay. So like going forward, we expect them in coming quarters to reverse, right?

Yes.

It will normalize.

And my second question is basically on the strategic partnership that we have with LO in on the Alloy Wheel. So where are we right now? And when can we expect them to contribute to our overall top line?

The second partnership is also, as I have always mentioned, under testing, and we are very confident that something should come out before H2.

And the update on the cable JV with TD Holding?

[ GTD ] Cables Holding, the production has come out and the system suppliers have audited the plant and the supplies again will start in H2.

And our current capacities basically sufficient for the initial level of orders for both?

Yes. That already we have set up because as you know, last two years, we have invested heavily and now they are giving the results.

The next question is from the line of Sahil Sanghvi from Monarch Networth Capital.

Well done for the good results. My first question is, sir, looking at the 35% growth that we have done this quarter, even if I remove the impact of roughly 8% of the price pass-on and then also we have outperformed the underlying industry, which grew 2 Wheeler industry, which grew by 20%. So what's exactly driving this growth? Is it wallet share expansion in our current customer base? Or how would you explain this?

Mr. Sahil, that's the [indiscernible], that's the track record of the company that for the last 30 years, we have been outperforming the industry. So I think that's what we have done in the last quarter also.

Right. And...

And that's what I just said that we'll outgrow this year also -- current year also.

Right. And so there was -- on the Alloy Wheel side, the first product was expected to be out in February. So if you can give us some update on that front.

That's already out. It came out on scheduled time from the Karoli plant and handed over to the Japanese customer. And that's what I said that H2 beginning, the supplies will start.

Right. And sunroof also, we are on track.

Yes, it is very much on track. The plant has been audited by the sunroof system suppliers. And again, the same time H2, all the previous ventures shall bring fruit and the supplies will start.

So including this incremental revenue that we can expect something from sunroof and from Alloy Wheels, this is -- the 20% guidance is including all of this, right?

We have not given you 20% guidance. We have given you mid-teens guidance. I would like to correct that.

This including the sunroof and Alloy Wheels, right?

Naturally, because how you outgrow the industry, you add new products, you add more content and you add new customers. This is how you grow. There's no rocket science in outgrowing.

[Operator Instructions] The next question is from the line of Preet from InCred AMC.

Congratulations for the good set of results. Sir, just adding on to the last participant's question that you mention you have been outgrowing the industry from past couple of years and by adding new products. And so what was the reason -- exact reason behind this year that how we outgrow the market? And what would be the reason that we would be growing -- outgrowing the market in FY'27?

See, I just now told the answered this question that one is the historical reason because we have been outperforming and that we continue to do so. Second thing is that whatever joint ventures we signed or the collaborations we signed, they will bring fruit in the coming year. They'll start bringing fruit from H2 onwards, and they will totally certify in the next year. So these two years, we'll be outgrowing, again, because of the new products. And meanwhile, we keep on adding small, small new customers. They start small after a lot of testing and then they grow, have a natural growth. Am I clear?

[Operator Instructions] As there are no further questions, I now hand the conference over to Mr. Kuldip Singh Rathee from ASK Automotive Limited for closing comments.

Thank you, ladies and gentlemen. Thank you very much for sparing your valuable time and attending the conference earnings call. And we would like to reassure you that again, this year, we'll be working hard, and we'll try to come up to your expectations. 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.