Kross IPO - Issue Details, Peer Comparison, Financials, Strategies, Risks And More: Anand Rathi

Anand Rathi Report

Kross Ltd.'s launched its initial public offering today and closes on Sept. 11. The Jharkhand-based company is a leading manufacturer specializing in the production of forged, machined, and assembled components for the commercial vehicle and agricultural tractor segments. The company has set the price band in the range of Rs 228-240 per share. The minimum order lot for subscription is 62.

The Rs 500 crore IPO comprises of equity shares worth Rs 250 crore and an offer for sale of equity shares to the tune of Rs 250 crore.

Objects of the Issue

• Funding of capital expenditure requirements of the Company towards the purchase of machinery and equipment.

• Repayment or prepayment, in full or in part, of all or a portion of certain outstanding borrowings availed by the Company, from banks and financial institutions.

• Funding working capital requirements of the Company.

• General corporate purposes.

Valuation & Outlook

Kross, is diversified manufacturer of trailer axles, suspension assemblies, and forged and precision machined high-performance safety critical parts for M&HCV and farm equipment.

The company is a parts supplier to tractor-trailer segment, which is currently outperforming the medium- and- heavy commercial vehicle industry due to the preference of cargo fleet operators for trailers over rigid vehicles in the 55 tonne plus segment.

Additionally, Kross is undergoing a backward integration through axle beam extrusion, which could enhance margins and has secured firm exports orders that have improved revenue visibility.

The company has relatively seen expansion in Ebitda and revenue margins over last two fiscals due to superior product mix and increase in-house production. However, given the cyclicality of the commercial vehicle business consistency in the performance remains a concern.

On the valuation front, at the upper price band, Kross is seeking the PE of 34 times for FY24 with market capitalization of 15480 million post-issue which seems the issue is fully priced.

However, considering all its business prospects and stable financial performance we recommend a “Subscribe for long term” rating to the IPO with higher risk appetite.

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