IPO Alert: Kross opens today with a 20% GMP surge; should you subscribe?

Kross IPO opens today: Brokerages including SBI Securities, Deven Choksey Research, and BP Wealth Management remain bullish on the initial public offering (IPO) of Kross, a manufacturer of forged and precision-machined safety-critical parts. The IPO opened for public subscription today. 

With this IPO, Kross seeks to raise Rs 500 crore by offering a fresh issue of 10,416,667 shares and an offer for sale of 10,416,667 shares, with a face value of Rs 5 each. The company has announced that it has already raised Rs 150 crore from anchor investors, whose bidding was concluded on Friday, September 6, 2024.

Kross's IPO is available at a price band of Rs 228-240 per share and a lot size of 62 shares. Accordingly, investors can bid for a minimum of 62 shares and in multiples thereof. The minimum amount required by a retail investor to bid for the Kross IPO is Rs 14,880. Kfin Technologies is the registrar for the issue, while Equirus Capital is the book-running lead manager.

 

Kross IPO timeline

The three-day subscription window for the Kross IPO ends on Wednesday, September 11, 2024. Following that, Kross IPO shares are likely to be allotted on Thursday, September 12, 2024, and accordingly, the company’s shares will be credited into demat accounts on Friday, September 13, 2024. Kross shares are expected to debut on the bourses on Monday, September 16, 2024, with listing on the BSE and NSE.

Kross IPO objective

The company intends to utilise the net proceeds of the fresh issue for funding capital expenditure requirements towards the purchase of machinery and equipment. The company will use the remaining amount for the repayment or prepayment, in full or in part, of certain outstanding borrowings from banks and financial institutions; for funding working capital requirements; and for general corporate purposes.

Kross IPO grey market premium (GMP)

Meanwhile, the unlisted shares of Kross were commanding a grey market premium (GMP) of Rs 48 or 20 per cent at the upper end of the IPO price on Monday, according to several sources tracking grey market activities.

Kross IPO Review

Should You Apply for the Kross IPO?

SBI Securities - Subscribe for long-term

Analysts at SBI Securities remain bullish on the Kross IPO and recommend investors subscribe to the issue for a long-term investment horizon. The brokerage in its report highlighted that at the upper price band of Rs 240, the company is valued at an FY24 P/E multiple of 34.5x based on its post-issue capital. According to the brokerage, the issue appears to be fairly valued given the healthy growth track record of the company.

"The company's revenue/Ebitda/PAT has grown at a CAGR of 44.4 per cent, 65.5 per cent, and 91.8 per cent respectively over FY22-24. The IPO proceeds will be used by the management to repay debt and fund future growth, which will boost earnings growth for the company. We recommend subscribing to the issue for a long-term investment horizon," said SBI Securities in its report.

Deven Choksey Research - Subscribe

Deven Choksey Research has also assigned a ‘Subscribe’ rating to the public issue of Kross. According to the brokerage, Kross is strategically positioned for sustained growth through its diverse range of manufacturing capabilities in trailer axles, suspension assemblies, and precision components for medium and heavy commercial vehicles (M&HCV) and farm equipment. The brokerage believes that with a strong track record of financial performance and a commitment to innovation, Kross stands to benefit from the ongoing demand for high-quality, safety-critical components.

As per Deven Choksey Research, Kross is expected to trade at an adjusted PE multiple of 34x at the upper price band. "Given the impressive growth metrics and competitive positioning, coupled with high return ratios compared to its peers, we assign a ‘Subscribe’ rating for the Kross IPO," said Deven Choksey Research.

BP Wealth Management - Subscribe

Analysts at BP Wealth Management have recommended investors subscribe to the public issue of Kross. According to the brokerage, the company’s comprehensive backward and forward integration enhances operational efficiency, quality control, and market responsiveness. The upcoming technological advancements in axle beam extrusion and seamless tube manufacturing are set to provide a first-mover advantage, further strengthening Kross’s market position. Moreover, with the increasing focus on Atmanirbhar Bharat and various PLI schemes, Kross is well-positioned to benefit from economic tailwinds. "The rising profitability highlights the company’s ability to manage costs effectively. There was a noticeable hike in finance costs, but it didn’t significantly impact the company’s profitability. The issue is valued at a P/E of 28.9x on the upper price band based on FY24 earnings, which is deemed to be fair. Therefore, we recommend a ‘Subscribe’ rating for the issue," said BP Wealth Management.

About Kross Limited

Kross specialises in manufacturing and supplying trailer axles, suspension assemblies, and a wide range of forged and precision-machined high-performance safety-critical parts for Medium & Heavy Commercial Vehicles (M&HCV) and farm equipment segments. The company supplies products to a diversified client base, including large original equipment manufacturers (OEMs) in the M&HCV and tractor segments, tier-one suppliers to OEMs, domestic dealers, and fabricators for its trailer axle and suspension business.