Last updated on January 12, 2020
Kranti Industries IPO is scheduled to open on 14 February for subscription and the Pune-based automotive component manufacturer is looking to mobilize as much as INR8.58 crore by offering 2,319,000 shares. The IPO, priced at INR37 per share, will involve a fresh issue of 1,752,000 shares amounting to INR6.48 crore. In addition, there will be an Offer For Sale (OFS) by existing shareholder Mrs. Basanti Kundanmal Vora. Our readers can find more details about the upcoming IPO on this page. We have gone through the prospectus to better understand the company and have analyzed its operations on 25 parameters. Here is our Kranti Industries IPO Review, please scroll down for the total score.
Kranti Industries IPO Review: Business Basics
Are the company’s annual revenues more than INR50 crore?
Yes, based on the six months of FY2019, Kranti Industries had revenues of INR33.22 crore which annualizes beyond INR50 crore.
Are the company’s annual profits after tax in excess of INR5 crore?
No, Kranti Industries’ net earnings after tax stood at INR0.90 crore in FY2018 while net profits for H1 FY2019 were INR1.37 crore.
Has the company got a strong and recognizable brand?
No. Kranti Industries sells its products to automakers and tractor manufacturers but is yet to become a recognizable brand.
Is there a strong moat in place in the form of entry barriers, market reach etc?
Yes, Kranti Industries operates in a capital intensive industry which acts as a formidable entry barrier. It also has longstanding business relationships with its clients which is another positive.
Is the company free of big client risks in terms of impact on revenues?
Yes. Kranti Industries’ top 10 customers accounted for 94.58% of its total sales in FY2018. Given the fact that it supplies high volume products to a limited set of customers, this represents diversification across its clients. It also has a long-term contract with a couple of big customers (Mr. Sumit Vora told IPO Central that the contract with one of the customers is ending in December 2019 and may or may not be renewed).
Do exports contribute a sizeable chunk to annual revenues, giving the company an edge over its competitors?
No. Kranti Industries’ sales are largely focused on India.
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Is there a strong connect between the company and retail consumers?
Nopes. As mentioned above, the company operates in B2B (Business to Business) trade and thus, hasn’t got a retail connect.
Kranti Industries IPO Review: Management Analysis
Is the company’s top management experienced enough to lead operations through difficult times?
Yes, Sachin Vora and Sumit Vora – two of the promoters – have been actively involved in management and have led the company through several challenging business conditions.
Are the management members/promoters paying themselves fairly without jeopardizing shareholders’ interests?
Yes, we didn’t find excessive remuneration for management.
Do the promoters have sizeable equity left in the company after the IPO?
Yes, the promoters and promoter group currently own 6,974,330 shares or 98.93% equity stake in the company. Following the IPO, this shareholding will drop to 72.11%.
Is the current management trustworthy? Are there instances of putting shareholders’ interests at risk for personal gains?
Yes, we didn’t find such instances.
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Are the litigations or criminal proceedings against the company insignificant in nature and doesn’t involve big numbers?
Yes. There are a few tax-related cases outstanding against Kranti Industries and its subsidiary. However, the amount involved is quite small at INR15.62 lakhs. There are no criminal cases pending against the company or its promoters or directors.
Are the company management’s shares free from any pledge with banks or financial institutions?
Yes. As on the date of the prospectus, no promoter shares are pledged.
Are there external investors such as private equity or venture capital firms on board?
No. As mentioned above, the company is almost full-owned by the Vora family as of now.
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Kranti Industries IPO Review: Financial performance
Have the company’s revenues grown at a CAGR of at least 10% in the last three years?
Yes. Kranti Industries’ topline jumped from INR28.84 crore in FY2016 to INR46.11 crore in FY2018.
Have the company’s net profits grown at a CAGR of at least 25% in the last three years?
Not Applicable. The company posted losses in two of the last three years.
Has the Average Return on Equity (ROE) in the last three years been more than 15%?
No. The company’s average Return On Net Worth (RONW) in the last three years has been 0.63%.
Has the company maintained positive operating cashflows in the last three years?
Yes.
Has the company witnessed a declining trend in debt/equity (D/E) in the last three years?
Yes. Kranti Industries’ D/E ratio declined from 1.62 to 1.47 in the last three years.
Are the company’s working capital requirements less than 20% of its annual sales?
Yes. Kranti Industries requires high working capital but its working capital requirement stood at 16% of its annual revenues in FY2018.
Is the Debt/Equity ratio less than 1?
No, the company’s D/E ratio as of 31 March 2018 stood at 1.47.
Kranti Industries IPO Review: IPO objectives and valuations
Are the IPO objectives in line with the broad corporate guidelines? Funds raised shouldn’t be used for fancy purchases and upgrades.
Yes, the funds will be primarily used to augment working capital.
Is the company offering some discount on Price/Earnings (P/E) ratio compared to its peers?
Yes. The company is offering its shares at the P/E ratio of 28.91. While this is not very attractive, it is cheaper than some of its competitors. The company has listed Endurance Technologies, MM Forgings, Bharat Forge, and Rico Auto among its peers.
Is the company offering some discount on Price/Book Value (P/BV) ratio compared to its peers?
Yes, Kranti Industries’ P/BV is at 2 which is lower than most of its listed peers.
Are the contingent liabilities less than 10% of latest annual revenues?
Yes. Contingent liabilities including commercial tax and income tax stood at just INR14.42 lakhs in FY2018.
Kranti Industries IPO Review gets a score of 17/24. Head to our IPO discussion page to get latest subscription details and check out this page for latest IPO grey market rates.
Disclaimer – The objective behind Kranti Industries IPO Analysis is to offer an unbiased view of the company’s operations, offer details, strengths, weaknesses, financial performance and valuation. The IPO rating framework helps investors in taking a call if Kranti Industries IPO is worth investing or not. Nevertheless, this is not an IPO recommendation to subscribe or avoid and the decision to invest should be based on individual investor’s risk profile.
Is it a recommendation to invest?
PE ratio is little high but automotive is a growing business so it will grow. The growth is a secular story in automotive and exports is another area which will help further.