Is Kross IPO Good or Bad - Detailed Review

Kross Limited is kicking off its initial public offering which will be open from September 9, 2024, to September 11, 2024. While considering applying for this IPO, certain questions may arise in your mind, including whether the Kross IPO is good or bad, whether it is worth investing in Kross, and so on. In this article, we will cover a few details about Kross to better analyze its IPO.

Kross IPO - Company Overview

Incorporated in 1994, Kross Limited is one of the leading manufacturers and suppliers of trailer axles, suspension assemblies, and critical safety parts for medium and heavy commercial (M&HC)Vehicles and farm equipment. Backed with more than three decades of expertise, Kross Limited has emerged as one of the leading companies within the field of automotive components in India. 

The company has a wide portfolio of products that includes anti-roll bars, bevel gears, and a host of tractor components including PTO shafts and hydraulic lift parts form a substantial part of its product offerings.

It has five state-of-the-art manufacturing facilities at Jamshedpur, Jharkhand, which use the latest technologies in forging presses, high-precision machining equipment, and a state-of-the-art cathodic electro-deposition plant. 

Fully integrated, Kross Limited's manufacturing processes comprise forging, casting, machining, and heat treatment. Quality control is very stringent, with standards uniform for all products. Its research and development wing is also committed to innovation and product development activities, and hence, it keeps its competitive advantage in the market.

All its plants are fitted with the latest machinery, including high-pressure mould lines, turning centers, and robotic welding systems. The company is further expanding the production lines and a casting facility at Kross Limited to improve the range of products and enhance the production capacity.

Currently, the company has been able to produce forged components whose input weights reach 40kg and is still increasing its production capacity through expanding its facilities. Kross. In the coming years, its manufacturing facilities will be expanded to increase its production capability and multiply its product portfolio, which also includes the establishment of new lines for hydraulic covers and front brake drums.

Kross IPO - Customer Base

The major customers of Kross Limited are major original equipment manufacturers (OEMs) for M&HCV and tractors, tier-one suppliers, domestic dealers, and fabricators. Their commitment to quality products has created a long-term relationship with key customers such as Ashok Leyland and Tata International. They also secured new orders from customers such as Leax Falun AB and a Japanese OEM, starting bulk dispatches from August 2023. With a wide portfolio and good track record, Kross Limited is capable of responding to all kinds of demand, from large lots down to small, specialized components.

Kross IPO - Financial Overview

If we take a look at the financial overview of Kross Ltd, it has shown significant performance over the past 3 years. The increase in revenue from operations which has increased by Rs.305 crores from FY22 to FY24 indicated the steady growth in the business. The company reported a profit of Rs.44.82 Cr in FY24 which was Rs.23.59 Cr in FY22. 

Additionally, its gross profit margin has also increased to 42.62% which depicts the cost-controlling capacity of the company. EBITDA margins increased to 13.08% following the PAT margins with an increase of 7.41% indicating higher profitability compared to the previous financial year.

Furthermore, the company’s ROE was reported at 30.57% in FY24, reflecting strong returns to its shareholders and the ROCE stood at 28.15% for the year FY24. It indicates that the company has given good return to its shareholders and has efficiently utilised its overall resources

Kross IPO- Revenue Breakup

The M&HCV is a key revenue-generating segment for the company which was reported Rs. 551.20 Crs for FY24 which has attributed 88.87% of the total revenue indicating a huge reliance on this segment for revenue generating.

On the other, the revenue generated by the company for the remaining segments has declined year-on-year and this has resulted in the reduction of revenue diversification. 

Kross IPO - Industry Overview 

In fiscal year 2024, the M&HCV segment has a slight dip of 3% compared to the previous financial year. However, It regained strong growth In fiscal year 2023, where MHCV sales recorded a growth of 40%. This recovery brought MHCV sales to approximately 90% of the level recorded in fiscal year 2019, a notable milestone. The economic activities across various sectors played a key role in this recovery. Among the  M&HCV segments, Tractor trailers were the fastest-growing category in the MHCV segment, witnessing a growth of 71% CAGR between fiscals 2021 and 2024, followed by the MCV haulage and MAV haulage segments at 50% CAGR and 32% CAGR, respectively. Tippers grew at 14% CAGR, whereas ICVs clocked 1% growth during the same period. 

Kross IPO - Peer Comparison:

From the above table, you can see that Kross Limited is the smallest company on the list in terms of revenue generated in FY24. However, the company has generated the highest ROE and ROCE among the companies in the list suggesting that it provides the highest returns to the shareholders and is most efficient in its resource utilization. 

Kross IPO Details

Kross IPO Date

The IPO of Krossis open to subscription from September  9, 2024, to September 11, 2024. The shares will be allocated to investors on September 12, 2024, and the company will be listed in the NSE and BSE on September 16, 2024

Kross IPO Issue Price

Kross is offering its shares in the price band of Rs. 228 to Rs.240 per share. This means you would require an investment of approximately Rs. 14,880 per lot (62 shares) if you are bidding for the IPO at the upper price band.

Kross IPO Size

The company is offering a total of 20,833,334 shares, amounting to an aggregate of Rs 500  Crores. Out of these, 10,416,667 shares worth Rs.250 Crores are offered through a fresh issue, and 10,416,667 shares worth Rs.250 Crores are offered through an offer for sale.

Kross IPO GMP

As of 10th September 2024 at 11:24 AM, Kross IPO’s last GMP is Rs. 48. It has an estimated listing price of Rs.288 and the expected gain or loss per share is 20.00%

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Is Kross IPO a Good or Bad Investment? Final Thoughts

Kross Limited IPO review: With its focus on innovation and expansion the company could lead to future growth. However, the company's heavy dependence on the commercial vehicle segment and declining diversification in other revenue streams might raise concerns. While its financials reflect steady improvement, the broader market conditions and reliance on a single revenue driver could impact its long-term growth potential. Investors should consider both the strengths and risks before investing in this IPO.

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