The initial public offering (IPO) of Kross Ltd opened on Monday, September 9. The company is offering its shares in the range of Rs 228-240 apiece. Investors can apply for a minimum of 62 equity shares and its multiples thereafter. The IPO will close for bidding on Wednesday, September 11.
Kross Ltd, formerly known as Kross Manufacturers (India) was established in 1991. It manufactures and supplies trailer axles and suspensions and a wide range of high-performance forged and precision machined safety critical parts for medium and heavy-duty commercial vehicles (M&HCV) and agricultural equipment.
The Rs 500 crore IPO of Kross includes a fresh share sale of Rs 250 crore and offer-for-sale (OFS) of up to 1.04 crore shares amounting to Rs 250 crore by its promoters. The net proceeds from the fresh issue shall be utilized towards funding of capital expenditure requirements; repayment of debt; funding working capital requirements; and general corporate purposes.
Kross' product portfolio includes axle shafts, companion flanges, anti-roll bars and stabilizer bar assembly, suspension linkages, differential spiders, bevel gears, planet carriers, inter-axle kits, rear-end spindles, pole wheels, and a variety of tractor components for the hydraulic lift arrangement, power take-off (PTO) shafts and front axle spindles.
The Jamshedpur-based company supplies its products to major original equipment manufacturers (OEMs) that manufacture M&HCVs and tractors, as well as to domestic dealers and trailer axle and suspension manufacturers that supply OEMs in the M&HCV segment.
For the year ended on March 31, 2024, Kross Ltd reported a net profit of Rs 44.88 crore with a revenue of Rs 621.46 crore. The company reported a net profit of Rs 30.93 crore with a revenue of Rs 489.36 crore. The company will command a total market capitalization of close to Rs 1,550 crore.
Kross Ltd has reserved 50 per cent of the net offer for qualified institutional bidders (QIBs), while 15 per cent of the shares have been reserved for non-institutional investors (NIIs) and retail investors will get 35 per cent and 35 per cent of the net offer.
Equirus Capital is the book running lead manager of the Kross IPO, while Kfin Technologies is the registrar for the issue. Shares of the company shall be listed on both BSE and NSE, with Monday, September 16 as the tentative date of listing at the bourses. Here's what host of brokerage firms said about the IPO of Kross Ltd:
Swastika Investmart Rating: Neutral Kross is a rapidly growing player in the organized trailer axle manufacturing industry, with backward integration capabilities. It has long-term relationships with major domestic and global clients, with consistent growth in revenue, profit, and margins, with a favorable debt-to-equity ratio, said Swastika Investmart.
"The IPO's valuation is relatively high. Considering the premium valuation and potential challenges in the current market, we recommend a neutral rating for the IPO," it said.
SBI Securities Rating: Subscribe for long term Kross IPO is valued at FY24 P/E multiple of 34.5 times based on its post issue capital. The issue appears to be fairly valued given the healthy growth track record of the company. Kross’ revenue, Ebitda and PAT has grown at a CAGR of 44.4 per cent, 65.5 per cent and 91.8per cent, respectively over FY22-24, said SBI Securities.
"The IPO proceeds will be used by the management to repay debt and fund future growth which will boost earnings growth for the company. We recommend subscribing to the issue for a long term investment horizon," it said.
StoxBox Rating: Subscribe The rising profitability highlights the company's ability to manage costs effectively. There was a noticeable hike in finance costs, but it didn’t seem to have a significant impact on the profitability of the company, said StoxBox. "The issue is valued at a P/E of 28.9 times on the upper price band based on FY24 earnings, which is deemed to be fair," it added with a 'subscribe' rating.
Canara Bank Securities Rating: Subscribe for long term Kross's proximity to India’s largest truck manufacturing hub allows it to leverage its supply chain for cost and production efficiency. However, there is a customer concentration risk, as over 66 times of the company’s revenue in the past three fiscal years has come from its top five clients. The company’s financial performance reflects solid growth, said Canara Bank Securities.
"Despite a slightly higher P/E ratio of 28.92 times compared to the industry average, Kross' strong future growth potential, capacity expansion plans, and forward integration strategies make this issue appear attractive. Therefore, we recommend to 'subscribe' this issue for long-term gains," it said.
DR Choksey Finserv Rating: Subscribe Kross is strategically positioned for sustained growth through its diverse range of manufacturing capabilities in trailer axles, suspension assemblies, and precision components for M&HCV and farm equipment. The company is expanding its operational footprint with significant investments in advanced manufacturing technologies and new product lines, said DR Choksey Finserv.
"Kross' diverse client base, including major OEMs and Tier-1 suppliers, contributes significantly to its revenue, with a strong focus on the M&HCV segment. With a strong track record of financial performance and a commitment to innovation, Kross stands to benefit from the ongoing demand for high-quality, safety-critical components," it said with a 'subscribe' rating.