Kross Limited, established in 1994, has become a key player in the manufacturing of forging components for the top OEMs and Tier 1 companies in India, supplying critical components for the commercial vehicle, tractor, and trailer axle industries. The company specializes in producing high-performance, safety-critical components, ensuring that its products meet the stringent demands of the automotive and industrial sectors.

Kross Limited IPO Overview:

The Kross Limited Initial Public Offering (IPO), a Book Built Issue, aims to raise ₹500.00 Crores, comprising a Fresh Issue of 10.41 Lakh shares worth ₹250.00 Crores and an Offer for Sale (OFS) of 10.41 Lakh shares, amounting to ₹250.00 Crores. The IPO will be open for subscription from September 09, 2024, to September 11, 2024.

The price band for the Kross IPO is set between ₹228 and ₹240 per equity share, with a minimum lot size of 62 shares. Retail investors are required to invest at least ₹14,880, while High-Net-Worth Individuals (HNIs) must invest in at least 14 lots, amounting to ₹208,320.

The shares are set to list on both the BSE and NSE on September 16, 2024, following the allotment finalization on September 13, 2024. The Book Running Lead Manager (BRLM) for the IPO is Equirus Capital Private Limited, with KFin Technologies Limited acting as the Registrar.

Grey Market Premium (GMP) Insights:

The Grey Market Premium (GMP) for Kross Limited IPO is currently expected to range between ₹25 and ₹30. This indicates potential listing gains of 10%-13%. However, investors should be aware that GMP is not a guaranteed indicator of post-listing performance, as it is determined in an unregulated grey market, where prices fluctuate based on demand and supply rather than actual company fundamentals.

Investors are urged to exercise caution when using GMP as a metric for investment decisions. While GMP can provide insights into market sentiment, it should not be the sole basis for investment, particularly for long-term investors.

Live Subscription Status:

The Kross Limited IPO will be open for subscription on September 09, 2024, and live subscription status updates will be available throughout the subscription period. Investors can monitor the progress of subscriptions across retail investors, HNIs, and institutional buyers to gauge the demand for the shares.

Kross Limited Financial Performance:

Kross Limited has demonstrated a strong financial trajectory in recent years. The company's revenue increased from ₹2,978.81 million in FY22 to ₹4,893.57 million in FY23 and reached ₹6,214.64 million in FY24, reflecting a solid growth rate. This consistent rise in revenue is indicative of the company's expanding market presence and increased demand for its forging components.

Similarly, EBITDA grew from ₹295.48 million in FY22 to ₹807.58 million in FY24, showcasing the company’s ability to improve its operational efficiency. Profit After Tax (PAT) followed a similar trend, increasing from ₹121.69 million in FY22 to ₹448.81 million in FY24. These financial figures indicate the company’s robust performance and ability to generate profits.

IPO Pricing and Valuation:

The IPO pricing is based on a pre-issue EPS of ₹8.30 and a post-issue EPS of ₹6.59. The pre-issue P/E ratio stands at 28.91x, while the post-issue P/E ratio is 34.53x, making it higher than the industry average P/E ratio of 24.85x. This suggests that the Kross IPO is priced on the higher end relative to its industry peers.

Despite these relatively high valuation metrics, the company’s Return on Capital Employed (ROCE) for FY24 is a strong 28.15%, and its Return on Equity (ROE) stands at 30.57%. These figures underscore the company’s efficient use of capital and profitability, making the valuation justifiable for investors seeking a growth-oriented company.

Objectives of the IPO:

The proceeds from the Kross Limited IPO will be used for the following purposes:

₹700.00 million will be allocated for capital expenditure, primarily for purchasing new machinery and equipment to enhance the company’s manufacturing capabilities.

₹900.00 million will be utilized to repay or prepay borrowings, helping the company reduce its debt load and improve financial stability.

₹300.00 million will go towards meeting the company’s working capital requirements, ensuring smooth operations as the company continues to grow.

The remaining funds will be used for general corporate purposes.

These objectives highlight the company’s focus on scaling up its production capacity, improving its balance sheet, and ensuring long-term growth.

Kross IPO Allotment and Listing:

Investors can check the allotment status of their Kross Limited IPO shares on the KFin Technologies Limited website from September 13, 2024. To do so, investors need to:

Navigate to the IPO allotment status page.

Select Kross Limited IPO from the dropdown list of available IPOs.

Enter their application number, PAN, or DP Client ID.

Submit the details to view their allotment status.

The shares are expected to list on September 16, 2024, on both the BSE and NSE, providing investors with an opportunity to trade the stock.

IPO Review and Recommendation:

Kross Limited has shown strong financial growth, with its revenue, EBITDA, and PAT consistently improving year over year. The company's focus on capital expansion and debt reduction positions it well for future growth. However, the IPO’s valuation is on the higher side, with a post-issue P/E ratio of 34.53x, which is above the industry average.

Despite the potential for 10%-13% listing gains as indicated by the GMP, investors should be cautious. The high valuation, combined with the current market conditions, suggests that the Kross Limited IPO may not be the best option for those seeking listing gains or long-term investment opportunities.

Our recommendation is to avoid the IPO, especially for retail investors and those looking for short-term profits.

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