The initial public offering (IPO) of Kross Ltd. is one of the most anticipated events in the Indian stock market, as the company gears up to raise Rs 500 crore. Investors and market watchers are keenly eyeing the details of this IPO, which is expected to attract significant interest. This article will cover everything you need to know about the Kross IPO, including the company’s background, issue details, financial performance, use of proceeds, and the associated risks.
Key Details of Kross IPO
The Kross IPO is set to open for subscription on September 9, 2024, and will remain open until September 11, 2024. The IPO comprises a fresh issue of Rs 250 crore and an offer for sale (OFS) of shares worth another Rs 250 crore. The total issue size is Rs 500 crore. The price band for the IPO has been set at Rs 228-240 per share, and the market capitalization of Kross Ltd. at the upper end of the price band is estimated to be Rs 1,548 crore.
Here’s a snapshot of the issue details:
- Issue opening date: September 9, 2024
- Issue closing date: September 11, 2024
- Price band: Rs 228-240 per share
- Fresh issue: Rs 250 crore
- Offer for sale (OFS): Rs 250 crore
- Total issue size: Rs 500 crore
The IPO is expected to be listed on major Indian stock exchanges, and interested investors are advised to keep an eye on the subscription details during the open period.
About Kross Ltd.
Kross Ltd. is a diversified manufacturing company specializing in the production and supply of trailer axle and suspension assemblies. The company also produces a wide range of forged equipment catering to the medium and heavy commercial vehicles (M&HCV) sector and the farm equipment industry.
Kross Ltd. commenced operations in 2019 and has since seen robust growth in both revenue and profitability. The company has carved a niche for itself in the trailer axle and suspension assembly market, which has been a key growth driver over the past few fiscal years. The company operates in a highly competitive market but has managed to expand its customer base and improve financial performance significantly.
Use of Proceeds
Kross Ltd. plans to utilize the proceeds from the IPO to strengthen its financial position by reducing debt, funding capital expenditure, and expanding its working capital.
- Debt repayment: The company will allocate Rs 90 crore from the IPO proceeds to repay its borrowings. This move is expected to reduce interest costs and improve overall profitability.
- Capital expenditure: Around Rs 70 crore will be used for purchasing machinery and equipment to boost production capacity and enhance operational efficiency.
- Working capital: Kross Ltd. will reserve Rs 30 crore to meet its working capital requirements, ensuring smooth operations and improved cash flow.
The remaining funds will be used for general corporate purposes, further improving the company’s financial flexibility.
Financial Performance of Kross Ltd.
Kross Ltd. has demonstrated remarkable financial growth over the past three fiscal years. The company’s revenue and profitability have increased steadily, making it an attractive investment option for those looking at long-term growth prospects.
- Revenue growth: The company’s revenue has grown at a 28% compound annual growth rate (CAGR) over the last three fiscal years, with revenues doubling since fiscal 2022.
- Profitability: Profit growth has been even more impressive, with profits increasing at a 54% CAGR during the same period. The company’s EBITDA margins have also expanded by approximately 400 basis points, now hovering around the 13% range, which is comparable to other players in the industry.
Here’s a summary of Kross Ltd.’s financial performance:
| Particulars (INR Cr) | FY24 | FY23 | FY22 | CAGR |
|---|---|---|---|---|
| Revenue from Operations | 620 | 488 | 297 | 28% |
| Gross Profit | 264 | 198 | 137 | |
| EBITDA | 80 | 57 | 29 | |
| Profit for the Year | 44 | 30 | 12 | 54% |
The company has managed to increase its return ratios, with Return on Equity (ROE) surpassing 30% and Return on Capital Employed (ROCE) nearly doubling over the last three fiscal years.
Segmental Revenue Breakdown
Kross Ltd.’s growth has been driven primarily by its trailer axle and suspension assembly division, which has grown fourfold over the past three years. This division contributes the highest percentage of the company’s overall revenue.
Here’s a breakdown of segmental revenue:
| Segment (INR Cr) | FY24 | FY23 | FY22 | CAGR |
|---|---|---|---|---|
| Trailer Axle & Suspensions | 269 | 162 | 66 | 60% |
| Tractor Components | 55 | 59 | 54 | 1% |
| Truck Components | 282 | 241 | 156 | 22% |
| Other Components | 13 | 25 | 19 | -12% |
Risk Factors
While Kross Ltd. has shown impressive growth, potential investors should be aware of several risks associated with the company’s business model:
- Customer concentration: The top five customers of Kross Ltd. have contributed approximately 66% of the company’s total revenues over the past three fiscal years. This reliance on a few key customers poses a significant risk if any of them decide to reduce or terminate their contracts.
- Dependence on the M&HCV sector: The demand for Kross Ltd.’s products is tied to the medium and heavy commercial vehicle industry, which is cyclical in nature. A downturn in the M&HCV sector could directly impact the company’s financial performance.
- Operational risks: Disruptions in the company’s manufacturing facilities due to labor strikes, supply chain issues, or equipment failures could affect its ability to meet customer demand.
- Supply chain disruptions: As a manufacturer, Kross Ltd. relies heavily on a stable supply chain. Any disruption, such as a shortage of raw materials, could impact production timelines and profitability.
Conclusion
The Kross IPO: All You Need to Know provides a comprehensive view of the company’s upcoming public offering, highlighting its financial growth, use of proceeds, and potential risks. Kross Ltd.’s robust financial performance over the last three fiscal years, coupled with its plans to reduce debt and expand operations, makes it an attractive investment opportunity. However, investors should carefully consider the associated risks before making any decisions.
With a strong foothold in the trailer axle and suspension assembly market, Kross Ltd. is well-positioned for future growth. The IPO will not only provide the company with the necessary capital to fund its expansion plans but also offer investors a chance to participate in its continued success.
