Kross IPO analysis

Kross IPO will open for subscription on September 9, 2024 and close on September 11, 2024. We break down the auto parts manufacturer's strengths, weaknesses, and growth prospects to help investors make an informed decision. Kross IPO in a nutshell Quality : Its three-year average ROE and ROCE were nearly 26 per cent each during FY22-24. Growth : Its revenue and net profit grew 44.4 and 91.8 per cent per annum, respectively, during FY22-24. Valuation : Post the IPO, the stock will be valued at a P/E and P/B of 34.5 and 3.9 times, respectively. Overview: The company will benefit from the growing demand in the automotive sector, especially in the commercial vehicle segment. The increased freight rates, growing requirement for replacement auto parts and healthy industrial and infrastructure growth will support this growing demand. However, Kross operates in a cyclical industry and faces stiff competition from many organised players. About Kross Incorporated in 1991, Kross manufactures a range of forged and machined components, such as trailer axles and suspension assemblies, especially for commercial vehicles. The company operates five manufacturing facilities in Jharkhand, with a capacity utilisation of 68 per cent in FY24. Medium and heavy commercial vehicles (M&HCVs) accounted for over 85 per cent of its FY24 revenue. Kross majorly caters to the domestic market and exports account for only 1 per cent of its total revenue. Strengths of Kross Loyal clients: Kross' marquee clients include major players such as Ashok Leyland and Tata International, which have long-term relationships with the company. Automobile clients tend to stick with component manufacturers due to the high costs and time investment involved in manufacturer onboarding, product testing and fitting. Weaknesses of Kross Revenue concentration: Almost 50 per cent of Kross' total revenue comes from its top three clients. Such heavy reliance on a few clients is risky-any disputes with any of them will lead to huge fluctuations in its revenue. Geographic concentration: Kross' five manufacturing facilities are located in Jharkhand. This exposes the company to significant operational risk, as any adverse situation or calamity in the region can impact its production. Kross IPO details Total IPO size (Rs cr) 500 Offer for sale (Rs cr) 250 Fresh issue (Rs cr) 250 Price band (Rs) 228-240 Subscription dates September 9-11, 2024 Purpose of issue Capex requirement, prepayment of loans and working capital requirements Post-IPO M-cap (Rs cr) 1,548 Net worth (Rs cr) 397 Promoter holding (%) 67.7 Price/earnings ratio (P/E) 34.5 Price/book ratio (P/B) 3.9 Financial history Key financials 2Y CAGR (%) FY24 FY23