Ca topper in RoE, RoCE; industry cyclicality a risk
ET Intelligence Group: Jharkhand-based Kross, a manufacturer of components for commercial vehicles, plans to raise ₹500 crore through an initial public offering. The IPO comprises a fresh issue of ₹250 crore with the proceeds to be used for capacity expansion and loan repayment and an equal amount of shares offered for sale by the promoter. Following the IPO, the promoter's stake will decrease to 68% from 100%.
The company is a parts supplier to the tractor-trailer segment, which is currently outperforming the medium-and-heavy commercial vehicle (MHCV) industry due to the preference of cargo fleet operators for trailers over rigid vehicles in the 55-tonne-plus segment. Additionally, Kross is undergoing a backward integration through axle beam extrusion, which could enhance margins, and has secured firm export orders that have improved revenue visibility. Given these factors, investors with a high risk appetite may consider the company's IPO, provided they can navigate the cyclicality of the commercial vehicle business.
Business Model: With over three decades of operations, Kross manufactures trailer axles, suspension assemblies, and forged components such as coupling flanges, differential spiders and stabiliser bar assemblies for truck manufacturers. The company holds a 26% market share in the trailer axle segment, which has a total industry size of around 70,000 units. Its customers include Ashok Leyland, Tata International DLT and a farm equipment company. Revenue from trailer and axle suspension components
