Kross Limited, established in 1994, has made a name for itself as a specialist in manufacturing forging components for Original Equipment Manufacturers (OEMs) and Tier 1 companies in India. The company provides a wide range of high-performance, safety-critical components primarily serving the commercial vehicle, tractor, and trailer axle industry. Over the years, Kross has built a strong reputation as a trusted supplier to some of the top players in the automotive sector, contributing significantly to the automotive supply chain.

In 2024, Kross Limited is launching its Initial Public Offering (IPO), with an issue size of ₹500 crores. The IPO comprises a Fresh Issue of 10.41 lakh shares worth ₹250 crores and an Offer for Sale of an additional 10.41 lakh shares totaling ₹250 crores. Investors can subscribe to this IPO from September 9, 2024, until September 11, 2024.

The company has set the IPO price band at ₹228 to ₹240 per equity share, with a minimum lot size of 62 shares. For retail investors, the minimum investment required is ₹14,880, while High-Net-Worth Individuals (HNIs) must invest a minimum of 14 lots, amounting to ₹208,320.

The IPO is being managed by Equirus Capital Private Limited as the book-running lead manager, and KFin Technologies Limited serves as the registrar for the issue. The shares are set to be listed on the BSE and NSE, with the tentative listing date scheduled for Monday, September 16, 2024.

IPO Subscription and Allotment Status

As of 06:02 PM on September 09, 2024, the Kross Limited IPO subscription status indicated that the IPO was subscribed 0.88 times on its first day of the subscription period. This suggests a moderate response from investors, but interest is expected to increase as the subscription period continues. Investors keen on tracking the live subscription status can do so through the BSE website or through market updates.

The allotment of shares is expected to be finalized on or around Friday, September 13, 2024. Investors will be able to check their allotment status by visiting the IPO allotment status page on the registrar's website or through NSE. Here’s a simple guide to checking the allotment:

Visit the IPO allotment status page.

Select Kross Limited IPO from the dropdown list.

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

Submit the details to check your allotment status.

Grey Market Premium (GMP) Insights

The Grey Market Premium (GMP) for Kross Limited IPO is projected to be in the range of ₹25 to ₹30. Based on the current financial performance of the company, this suggests potential listing gains of 10% to 13%. However, it is essential to understand that Grey Market Premium is an unofficial indicator of market demand and should be interpreted cautiously. Since GMP is not an official trading mechanism, it only provides an estimate of potential demand and should not be solely relied upon when making investment decisions.

Financial Performance

Kross Limited has demonstrated steady financial growth over the past few years. The company’s revenue grew from ₹2,978.81 million in FY22 to ₹4,893.57 million in FY23, and further to ₹6,214.64 million in FY24. This represents a significant upward trajectory in terms of sales and market penetration.

The company’s EBITDA also increased, from ₹295.48 million in FY22 to ₹575.22 million in FY23, and it stands at ₹807.58 million in FY24, indicating improved operational efficiency and profitability. Additionally, the Profit After Tax (PAT) rose from ₹121.69 million in FY22 to ₹448.81 million in FY24, showing that Kross has successfully increased its net profits despite rising costs.

For the Kross Limited IPO, the company is issuing shares at a pre-issue EPS of ₹8.30 and a post-issue EPS of ₹6.59. The pre-issue P/E ratio is 28.91x, while the post-issue P/E ratio stands at 34.53x, which is higher than the industry P/E ratio of 24.85x. These metrics suggest that the IPO valuation is relatively high compared to its industry peers.

The company’s Return on Capital Employed (ROCE) for FY24 is 28.15%, while its Return on Equity (ROE) stands at 30.57%, which reflects strong financial efficiency. These numbers indicate that Kross is making good use of its capital to generate profits and maintain shareholder value.

Objectives of the IPO

The proceeds from the Kross IPO will be utilized for several key purposes:

₹700 million will be allocated toward funding capital expenditure requirements, specifically for the purchase of new machinery and equipment. This is expected to increase production capacity and improve operational efficiency.

₹900 million will be used for the repayment or prepayment of certain outstanding borrowings that the company has availed from banks and financial institutions. Reducing debt will help the company improve its financial leverage and free up resources for growth.

₹300 million will go toward funding working capital requirements, ensuring the company has sufficient liquidity to support its operations.

The remaining funds will be utilized for general corporate purposes, helping the company manage its day-to-day operations and expand its market presence.

Kross Limited IPO Review and Recommendation

Kross Limited is a well-established player in the forging components industry, catering to top OEMs and Tier 1 companies across India. The company’s consistent financial performance and focus on high-performance, safety-critical components make it an attractive proposition for those interested in the automotive manufacturing sector.

However, the IPO’s valuation, with a post-issue P/E ratio of 34.53x, suggests that the company’s shares are being offered at a premium compared to its peers in the industry. While the company’s financial metrics, such as ROCE and ROE, are impressive, the high valuation may deter long-term investors seeking value-based investments.

For investors looking to capitalize on short-term gains, the Grey Market Premium of ₹25 to ₹30 indicates potential listing gains of 10% to 13%, which might be appealing. However, for those with a long-term investment horizon, we recommend avoiding the Kross Limited IPO due to its relatively high valuation and the uncertainty surrounding future growth prospects.

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