Hero, Honda auto parts supplier ASK Automotive puts die-casting unit on sale
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Mumbai: ASK Automotive Pvt. Ltd, a maker of auto brake parts for two-wheelers, has put its aluminium pressure die-casting unit AA Autotech Pvt. Ltd (AAAPL) on the block, two people aware of the development said.
The company recently mandated Edelweiss Investment Banking to sell the division which counts Honda Motorcycle and Scooter India (HMSI), Hero MotoCorp Ltd, Suzuki Motorcycle India and Mahindra and Mahindra among its customers, the two said on condition of anonymity.
An ASK spokesperson declined to comment.
An Edelweiss spokesperson did not respond to an e-mail seeking comment.
AAAPL manufactures components mainly for the two-wheeler industry.
ASK group was founded in 1988 with the incorporation of Ask Automotive Pvt. Ltd by K.S. Rathee. It makes automotive components such as brake shoes, safety control cables, brake panels, crank cases and hubs.
Its top two customers HMSI and Hero MotoCorp contribute around 70% of total revenue. The group has a leadership position in its own niche (brake systems components), and meets around 70% of the requirement of brake shoes among original equipment manufacturers (OEMs) in India, according to a recent report by Crisil ratings.
“While the company has been active in the two-wheeler segment, it is not trying to increase its revenue share from the passenger vehicle and commercial vehicle segment,” one of the two people cited above said.
“It is possible that the decision to sell the casting business is part of the company’s strategy to venture into newer areas while exiting segments which are not high growth” the person added.
“This is the second time that the group is considering the sale of the division” the second person said.
According to Ask Automotive’s latest corporate filings, its profit after tax (PAT) rose to Rs48.92 crore in 2015-16 from Rs46.08 crore in the previous fiscal. Net sales increased to Rs870 crore from Rs834 crore.
AAAPL reported profit after tax and net sales of Rs3.33 crore and Rs215 crore, respectively in 2015-16, as against Rs1.13crore and Rs235 crore in 2014-15.