Review By Dilip Davda on Feb 8, 2019
Kranti Industries Ltd. (KIL) is engaged in the business of manufacturing and supplying of precision machined components. With an operating history of more than two decades, KIL is primarily known for range of automotive component and non-automotive (off highway) components. It manufactures various automotive components varying from 100 MM to 1200 MM in size. The company manufactures customized products for reputed Original Equipment Manufacturers (OEMs) of diverse industries such as passenger cars, electric cars, two wheelers, tractors, construction machineries, railways, light vehicles, off-highway, heavy trucks etc.
Over the years it has diversified its product portfolio and presently caters to various sectors by developing components for construction, automobile, commercial vehicle, pneumatic tool, wind mill, medical industry, etc. KIL has a diversified client base and is committed to continuing to diversify product offerings, customer base and geographical footprint, thereby minimizing exposure to individual geographies, industry sectors, customers including Graziano Transmission India Pvt. Ltd, John Deere India Pvt. Ltd, CNH Industrial (India) Private Limited formerly known (New Holland Fiat (I) Pvt. Ltd), Carraro India Pvt. Ltd, Jaya Hind Industries Limited, Endurance Technologies limited, Neosym Industry Limited (Sanaswadi) and Meltwel Scrap Traders, etc. Currently KIL has on an average 45 plus running components with around 20 turning obsolete and similar quantity under development.
To part finance its working capital and general corpus fund needs, KIL is coming out with a maiden IPO of 2319000 equity shares of Rs. 10 each at a fixed price of Rs. 37 per share to mobilize Rs. 8.58 cr. Issue comprises of fresh equity issue of 1752000 shares and offer for sale of 567000 shares. Issue opens for subscription on 14.02.19 and will close on 20.02.19. Minimum application is to be made for 3000 shares and in multiples thereon thereafter. Post allotment, shares will be listed on BSE SME. Issue constitutes xx% of post issue paid up capital of the company.
Issue is solely lead managed by Fast Track Finsec Pvt. Ltd. while Link Intime India Pvt. Ltd. is the registrar to the issue. Having issued initial equity at par, KIL raised further equity at a price of Rs. 30 per share (based on Rs. 10 FV) in March 2015. It has also issued bonus shares in the ratio of 1 for 1 (30.09.2008), 1 for 1 (11.03.2011) and 1 for 2 (06.09.15). Average cost of acquisition of shares by the promoters is Rs. 1.73, Rs. 2.36, Rs. 2.53 and Rs. 2.55 per share. Post issue, KIL's current paid up equity capital of Rs. 7.05 cr. will stand enhanced to Rs. 8.80 cr. KIL enjoys good order book with niche specialized product development up the sleeve. It has planed expansion via JV with RGK group at Rajkot.
On financial performance front, for last three fiscals, KIL has (on a consolidated basis) posted turnover/net profit (loss) of Rs. 28.84 cr. / Rs. – (0.21) cr. (FY16), Rs. 29.25 cr. / Rs. – (0.93) cr. (FY17) and Rs. 46.11 cr. / Rs. 0.90 cr. (FY18). For the first half of current FY19, it has earned net profit of Rs. 1.37 cr. on a turnover of Rs. 33.22 cr. For FY16 it suffered a setback due to lower off take of components by tractor sector due to poor monsoon. As the company was having nearly 85% turnover from this segment, it felt the pinch in line with general trends. Having realized the risk of major supply to one segment, it started expanding its product range to cover other automobile and heavy equipment segment for which it made heavy capex.
Due to this, FY17 too it had to suffer as new machinery and product development took time adding interest and depreciation Burdon. With investment and time consuming diverse product profile developments from late FY16 and FY17, it regained its prime status of niche component supplied to varied segments like four wheelers, two and three wheelers, heavy construction equipments etc; from the following fiscal. This is indicative in its performance for FY18 and H1 of FY19.
For last three fiscals, it has posted an average EPS of Rs. 0.15 and an average RoNW of 0.63%. Loss for FY16 and FY17 impacted its average earnings and this has happened for the first time in the history of KIL as explained by the management. Issue is priced at a P/BV of 1.81 based on its NAV of Rs. 20.43 as on 30.09.18. If we annualize latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 12 against industry average of 27. As on 30.09.18; the company had orders on hand worth Rs. 30 crore (approx).
As per offer document, it has shown Endurance Techno, MM Forging, Bharat Forge and Rico Auto as its listed peers. Although not strictly comparable, they are currently trading at a P/Es of around 53, 14, 27 and 13 (as on 08.02.19).
This is the first mandate from Fast Track Fintec Pvt. Ltd., hence there is no past track records.
Kranti Industries have a diverse product range. It is catering to major segments in moving equipment/automobile sectors across the board. It also has a few specialized components (for EVs) under development. With all these factors, it is posed for bright prospects ahead. FY18 and H! FY19 is hinting at growth pattern. Investors may consider it for long term rewards.
Review By Dilip Davda on Feb 8, 2019
DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. With entry barriers, SEBI wants only well informed investors to participate is such offers. With crazy recent listings, SME IPOs have started drawing attention of investors across the board. However, as SME issues have entry barriers and continued low preference from broking community, any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on information available as on date coupled with market perceptions. Author has no plans to invest in this offer.
(SEBI registered Research Analyst-Mumbai).
About Dilip Davda
Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.
Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.
The Kranti Industries IPO Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered IPO Analysts tells you if Kranti Industries IPO worth investing. The Kranti Industries IPO Note sets the IPO expectations in systematic way which tells you if Kranti Industries IPO good to buy (good or bad / yes or no). The IPO Forecast tells you weather to invest in Kranti Industries IPO by providing IPO recommendations i.e. subscribe, avoid and neutral.
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