Kross IPO: All You Need To Know

The initial public offering of Kross Ltd. is set to open on Monday, as the company is looking to raise Rs 500 crore. The offering consists of a fresh issue as well as a offer for sale, each of shares worth Rs 250 crore.

The price band for the IPO has been set at Rs 228-240 per share. It will close on Sept. 11. The market value of the company at the upper end of the price band is Rs 1,548 crore.

The company is a diversified player in manufacturing and supply of trailer axle and suspension assembly. It also offers a wide range of forged equipment for medium and heavy commercial vehicles and farm equipment segments.

It commenced manufacturing and sale of trailer axle and suspension assemblies in 2019 and has witnessed robust growth over the past three fiscals.

• Issue opening: Sept. 9.

• Issue closing: Sept. 11.

• Issue price: Rs 228-240 per share.

• Fresh issue: Rs 250 crore.

• Offer for sale: Rs 250 crore.

• Total issue size: Rs 500 crore.

The company will use the proceeds to primarily repay borrowing and fund future capital expenditure. It will be repaying debt of about Rs 90 crore, while funding capex with Rs 70 crore raised in the IPO. The company is looking to incur capex for funding purchase of machinery and equipment.  

It will also be reserving about Rs 30 crore for funding working capital.

Kross has seen steady growth in its financial performance over the last three fiscals. While revenues have doubled since fiscal 2022, margins have also moved up by roughly 400 basis points to hover around 13% range. This is similar to some of the other players in the industry as well.

Profitability has also gone up almost 4 times in the same period.

This growth in revenues and profits has improved Ebitda margins by roughly 400 basis points. What's heartening to see is the company's growth has not diluted return ratios. On the contrary, it has substantially improved with return on equity going above 30% while return on capital employed has almost doubled in the last three fiscals.

This has been led by the strong performance in trailer axle and suspensions businesses. This division's revenue has grown 4 times over the past three fiscals and has been a key driver of overall revenue growth.

The truck component business is the highest revenue contributing division of the company and has been growing at a steady pace, in line with industry growth.

Some of the risks to the company's business include:

• Top five customers contributed 66% of total revenues in each of the last three fiscals.

• Demand for products tied to end user industry, which is medium and heavy commercial vehicles, and depends on business cycles.

• Disruption in manufacturing facilities due to labour strikes, supply chain issues etc.

• Manufacturing facilities are located mainly in similar geographic region and limited to Jamshedpur and Jharkhand.

• Competitive environment as there are many players now who have built technical expertise.