The Initial Public Offering of Kross Limited (Kross Limited IPO), a leading manufacturer of trailer axles and suspension assemblies, is set to commence today, September 9, 2024, and will remain open for subscription until September 11, 2024.
Kross Limited IPO
Kross Limited’s IPO is valued at ₹500 crore and consists of two main components:
Fresh Issue: 1.04 crore shares worth ₹250 crore.
Offer for Sale (OFS): 1.04 crore shares also totaling ₹250 crore.
The shares are being offered in a price band of ₹228 to ₹240 per share with a face value of ₹5. The company plans to use the IPO proceeds to address several financial needs:
Debt Repayment: ₹90 crore.
Capital Expenditure: ₹70 crore, primarily for acquiring machinery and equipment.
Working Capital: Approximately ₹30 crore.
Grey Market Premium (GMP)
The shares of Kross Limited are currently trading at a grey market premium of ₹50. This suggests that the expected listing price could be around ₹290, which is approximately 20.83% higher than the upper band of the IPO price range.
Key Dates
Subscription Dates: September 9 to September 11, 2024.
Allotment Date: Expected on September 12, 2024.
Listing Date: Tentatively set for September 16, 2024, on the NSE and BSE.
Conclusion
About Kross Limited
Established in 1991, Kross Limited specializes in the manufacturing of trailer axles and suspension assemblies and provides a diverse range of forged and precision machined components for medium and heavy commercial vehicles as well as farm equipment. Key clients include major players like Ashok Leyland and Tata International DLT.
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Financial Performance
Kross Limited has demonstrated robust financial growth in recent years:
Revenue: Increased by 27% to ₹620.3 crore in FY24.
Net Profit: Rose by 45.1% to ₹44.9 crore in FY24.
Growth Rates: Revenue, EBITDA, and profit after tax have grown at CAGRs of 44.4%, 65.5%, and 91.8%, respectively, over FY22-24.
Should you Invest?
SBI Securities: Recommends a ‘Subscribe’ rating for long-term investors, citing the company’s strong growth trajectory and fair valuation based on its historical performance. At the upper price band, the stock is valued at a P/E multiple of 34.5 times.
BP Equities: Also advises a ‘Subscribe’ rating, noting that the issue is valued at a P/E of 28.9 times based on FY24 earnings. Despite some increase in finance costs, the company’s profitability remains strong.
Kunvarji Wealth Solutions: Suggests subscribing with a long-term view, emphasizing the favorable market conditions for the auto ancillary sector and the company’s upward financial trends.
What are the Risks?
Customer Concentration: Kross Limited relies heavily on a few major clients, which account for around 66% of its revenue. Any disruption in relationships with these customers could negatively impact the company’s revenue.
Competitive Pressure: The company faces intense competition from both domestic and international players, which may impact its ability to secure new contracts and retain existing ones.
Raw Material Volatility: The company’s dependence on steel and other raw materials subject to price fluctuations could affect its cost structure and profitability.
Anchor Investments
Before the IPO, Kross Limited secured ₹150 crore from anchor investors, including notable names like EastSpring Investments, Matthews Asia Funds, LIC Mutual Fund, and several others.
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