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| KROSS Limited |
Introduction
The IPO season is in full swing, and one company that has caught the market's attention is KROSS Limited. With its IPO now open, investors are keenly observing this auto components manufacturer. The total issue size stands at ₹500 crore, of which ₹250 crore will be a fresh issue. Let’s delve deeper into the company’s business, future plans, and growth outlook, as shared by Kunal Rai, Director and CFO of KROSS Limited.
Company Overview
Founded in 1991, KROSS Limited is a well-established name in the auto components industry. The company focuses on manufacturing safety-critical components for medium and heavy commercial vehicles, specifically trucks and tractors. KROSS is known for its expertise in manufacturing and supplying trailer axle suspension assemblies. Their clients include top names like Ashok Leyland and Tata Motors. The company operates five manufacturing units located in Jamshedpur, Jharkhand.
Details of the IPO
KROSS Limited’s IPO has a total issue size of ₹500 crore. Out of this, ₹250 crore will be a fresh issue, and the remaining ₹250 crore is an offer for sale. The price band for the IPO is set between ₹228 and ₹240 per share. The proceeds from the fresh issue will primarily be used for expansion, loan repayment, and working capital requirements.
Business Focus and Expansion Plans
KROSS is deeply involved in producing suspension systems for trailers in India. The company is also branching out into axle beam extrusion, a new technology that promises to revolutionize the axle manufacturing process. This innovation positions KROSS as the first company in India to adopt this technology. Additionally, the company has initiated its export business, having secured clients in Sweden and Japan.
Financial Utilization of the IPO Proceeds
KROSS has a detailed plan for utilizing the ₹250 crore raised from the fresh issue. Around ₹70 crore will be used for future expansion, ₹90 crore for loan repayment, and ₹30 crore will go towards new working capital requirements. The remaining funds will be allocated for general corporate purposes.
Current Financial Status and Debt Management
At present, KROSS Limited has a total debt of ₹128 crore. The company plans to reduce this by ₹90 crore, significantly lowering its debt burden. According to Kunal Rai, the remaining debt will be manageable, and the company is well-positioned to handle its financial obligations efficiently. The loan repayment will improve KROSS's equity ratio, making it more financially stable.
Risk Management
With a substantial portion of their revenue coming from a few large clients like Ashok Leyland and Tata Motors, KROSS faces a concentration risk. However, the company views this not as a risk but as an opportunity. The long-standing relationships with their clients, some spanning over 18 years, give them confidence in managing any potential slowdowns.
Diversification Strategy
To mitigate risks, KROSS has diversified its product portfolio. The company’s revenue is not solely dependent on one segment. While trailer axle and suspension assemblies contribute 44% of their revenue, the remaining 56% comes from various other products, including axle shafts, anti-roll bars, and coupling flanges. This diversification strengthens the company’s financial stability.
Growth in the Domestic Market
KROSS has seen impressive growth in the domestic market, especially in the trailer and tractor segments. The tractor-trailer category, within the MNHS segment, has been growing at a rate of 20-25% year-on-year. This rapid growth has significantly contributed to KROSS’s revenue, which has doubled from ₹300 crore in FY22 to ₹620 crore today.
International Expansion
In addition to domestic success, KROSS is expanding internationally. The company has already established business relationships with clients in Sweden and Japan, and the export business is expected to grow further in the coming years. This international diversification adds another layer of stability to KROSS's business model.
Technology and Innovation
A key driver of KROSS’s future growth is its adoption of axle beam extrusion technology. This cutting-edge technology, which KROSS is pioneering in India, is expected to be a game-changer in the axle manufacturing industry. By staying ahead of technological advancements, KROSS is positioning itself for sustained growth in both domestic and international markets.
Revenue and Profit Growth
KROSS has achieved remarkable growth over the past two years. The company’s revenue increased from ₹300 crore in FY22 to ₹620 crore, while profits soared from ₹12 crore to ₹45 crore. This impressive growth is a testament to KROSS's strong business fundamentals and strategic planning.
Future Outlook
Looking ahead, KROSS aims to maintain its growth trajectory. With new technologies, international expansion, and a diversified product portfolio, the company is well-positioned to capitalize on market opportunities. KROSS’s backward integration in its Jamshedpur facility further strengthens its infrastructure, allowing the company to control costs and enhance operational efficiency.
Conclusion
KROSS Limited’s IPO offers investors a glimpse into the future of an innovative, growth-oriented company. With its focus on technology, international expansion, and strong client relationships, KROSS is poised for continued success. As the company moves forward with its strategic plans, the market will closely watch its journey.
FAQs
What is the IPO size of KROSS Limited?
The total IPO size is ₹500 crore, with ₹250 crore as a fresh issue and ₹250 crore as an offer for sale.How will KROSS use the funds raised from the IPO?
The company plans to use the funds for expansion, loan repayment, working capital, and general corporate purposes.What are the main products of KROSS Limited?
KROSS manufactures safety-critical components for medium and heavy commercial vehicles, including trailer axle suspension assemblies.How does KROSS plan to manage debt after the IPO?
The company will reduce its debt by ₹90 crore, bringing it down to a more manageable level.What is the growth outlook for KROSS Limited?
KROSS expects continued growth, driven by its new technologies, international expansion, and strong domestic market presence.
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