IPO

Kronox Lab Sciences Limited IPO

Kronox Lab Sciences Limited IPO

Introduction 

Kronox Lab Sciences Limited IPO is one of the new IPOs that it has recently filed with the market regulatory in an attempt to get approval to be floated in the market for its shares to be bought by the public.

Public Offer is scheduled to float IPOs of Kronox Lab Sciences Limited with the issue opening on June 3, 2024, and the issue closing on June 5, 2024. The IPO consists of a Fresh Issue of ₹80 crore, which is being offered through the book-built process, and an Offer for Sale of 1,70,00,000 equity shares of face value ₹10 each at a price to be decided through a 100% book-built process. A total of up to fifteen crores through an Offer for Sale (OFS) up to 9,570,000 Equity Shares. It has also issued Rs 10 face value fully paid-up shares sub that is at a price range of ₹ 129/- to ₹ 136/- per share. After the issue, they will be in BSE and NSE by June 10, 2024.

Company Background and Business Overview

Kronox Lab Sciences Limited is a chemical manufacturing company that has revealed steady, exponential growth and stability in its business. This evaluates the company as a chemical product manufacturer that also employs various sectors such as pharmaceuticals, agriculture, and industrial chemicals. All the company’s promoters – Jogindersingh Jaswal, Ketan Ramani, and Pritesh Ramani – have extensive experience in the business world accumulated throughout their long years of practice in the chemical industry.

Objectives of the IPO

The primary objectives of the Kronox Lab Sciences IPO are: 

Offer for Sale: To launch and facilitate the implementation of the offer for sale of up to 95,70,000 equity shares by the promoter selling shareholders.

Listing Benefits: To get the benefits of listing its equity shares on the Stock Exchanges, which in turn would help in improving its business visibility and brand image, the listing would provide marketability to the existing shareholders along with establishing an effective public listed equity share market for its equity shares in India.

Kronox Lab Sciences Limited IPO  

Financial Performance

Kronox Lab Sciences Limited has been established as a financially secure and sound company in the recent past with minted growth in key business aspects.  Below is a summary of its financial performance:

Analyzing the balance sheet it can be noted that:

March 2021: This is the amount of investment that each shareholder has in the business in the form of ordinary shares or common stock.  3, Tangible assets – 41, Reserves – 266, Borrowings – 0.1, Trade Payables — 66,  Other Liabilities — 43,

Total Liabilities — 376, Net Block — 57, Capital Work in Progress — 4, Receivables — 154, other asset – 32, cash & Bank – 21, Other assets – 32

March 2022: This shows that equity share capital has increased by 2.41, Reserves – 401, Borrowings – 6, Trade Payables – 115, Other Liabilities – 43,

Total Liabilities – 568, Net Block – 88, Receivables – 258, Inventory – 75, Cash & Bank – 28, Other Assets – 80.

March 2023: Equity share capital – 371.04,  Reserves- 76, Borrowings –  0, Trade payable- 78, Other liability –  15.

Total liability – 540 Net Block,  159 Receivables,  186 Inventory.

9M-FY24: Equity Share Capital –  371, Reserves – 232, Borrowings – 0, Trade Payables – 57, Other Liabilities – 10,

Total Liabilities – 670, Total Assets – 1033, Net Block – 260, Receivables – 170, Inventory – 72, Cash & Bank – 16, Other Assets – 145

The following table is a Profit & Loss Statement based on the updated rates which are in ₹ Million.

March 2021: The Sales figure is 625, while the figure for Cost of Materials Consumed is 344, the Change in Inventory is 0, the figure for Employee Cost is 54, Other Expenses stand at 79, Other Income is 8, EBITDA is 156, and the EBITDA Margin is 24%. VAT – 4. 06 %, Depreciation – 1. 91%, Interest – 0. 49 %, Net profit before tax – 132, Tax – 35, Net profit –  97, NPM – 15. 39%.

March 2022: Category –  822, Sales  – 480, Cost of materials consumed -6, Change in Inventory –  57,  Employee Cost, Vertical – 94, Other Expenses – l 11,  Other Income –  208,  EBITDA –  25, Cost of sales – 28%, Depreciation – 20, Interest – 4, Profit before tax – 184, Tax – 47, Net profit – 136, NPM – 16. 35%.

March 2023: Revenue from Sales – 956, Cost of material consumed – 580, Gross Profit – 376, Gross Margin – 43%, Total Employee Cost – 70, Total Other expenses – 117, Total Other Income – 19, EBITDA – 239, EBITDA Margin – 25%. Net operating income – 89, COGS – 32, Depreciation – 15, Interest – 1, Net operating profit – 41, Operating margin – 4%. 04%.

9M-FY24: Sales were at 677, while the cost of materials consumed was 328; inventories increased by 26, employees costs were 50, other expenditure was 68, and other income was 8; EBITDA was 212, and the EBITDA margin was 31. The greater proportion of the expenses was taken by the cost of Sales making up 34% followed by Depreciation at 10% and Interest expenses at 0%. PBT stands at 202, Tax 47, and finally, NP at 155 with NPM registered at 22. 60%

Cash flow statement. ( in millions).

March 2021: CF: Net Income Add Back Non-cash Items -154, Working Capital Increase/Decrease -(-5), Direct Taxes Paid -36, Net Cash Flow from operating activities -113, CF: Purchase of fixed assets -(-30), Net Cash used in investments -(-30), Proceeds from financing -(-12), Net Cash Flow – 71.

March 2022: Operating Activities Cash from Operating Activity 207, Working Capital Changes – opening balance 0, balance as of March 31, 2004 -69, Direct Taxes 48, Net Cash Inflow from Operating Activity 90, Investing Activities Cash from Investing Activity -76, Net Cash Inflow from investing activities -76, Financing Activities Cash from Financing Activity – 7, Net Cash Flow 7.

March 2023: Operating Cash Outflow: Cash from Operating Activity – 235, Working Capital Changes – 20, Direct Taxes – 58, Net operating cash inflow – 197, No Outflow: Cash from Investing Activity – -55 Net cash inflow from investing activities – -55, Sources of funds: Cash from Financing Activity – – 1 Net Cash from Operating and Investing & Financing – 141.

9M-FY24: Net cash from operating activity = 210-6+51= 210+51-6= 255 operating cash flow, Net cash from investing activity = -173, Net cash from Financing activity = -0, Net cash inflow = 153+(-173)= -20. 64, Worksheet – Net Cash flow – 20. 64

IPO Details

 Issue Size and Price Band

  •   Total Issue Size:  – ₹130. 15 crores.
  •   Price Band: Rs. 129 – Rs. 136 per equity share.
  •  Face Value: India Rs 10 for each equity share
  • Lot Size: It should peg a minimum of 110 shares, although the shareholders could apply for a maximum of 13 lots, which translates to 1430 shares.

Retail Allocation: 35%

Listing: NSE and BSE

Promoters: Jogindersingh Jai, Ketan Ramani, and British Ramani

Subscription Categories

  •  Qualified Institutional Buyers (QIBs): A clear definition of 50% of the issue is very important as it offers clear conceptual clarity to the subject matter in question.
  •  Non-Institutional Investors (NIIs): There are concerns that the reviews will only make up 15% of the issue.
  •  Retail Individual Investors (RIIs): For example, it reduced the government’s spending on health by 35% of the issue.

 Use of Proceeds

It is also an Offer for Sale (OFS), which, in essence, means that the company’s purpose is to help small shareholders monetize their stakes while helping the firm get listed on the exchanges for better brand recall and recall value. In the sale of shares, the promoters will also assist in attaining the objectives of listing equity shares on the stock exchanges and establishing the market for the shares in India.

Key Financial Ratios

  • Price to Earnings (P/E) Ratio: Based on the analysis made, the pre-IPO P/E ratio is close to 30. It has been 37x and was anticipated to reduce to 24. 47x post-IPO.
  •  Return on Net Worth (RONW): It currently sits at 25. averaging 66%, this shows that the company is otherwise effectively managing these key shareholders’ equity sources.
  •  Net Asset Value (NAV): ₹12.04 equity share

 Grey Market Premium (GMP)

The Gross$IPO at a market price of Kronox Lab Sciences is ₹80, which shows that its population has an interest in IPOs and the IPO market sentiment is positive.

 Industry Overview and Peers

Kronox Lab Sciences operates in the specialty chemicals vertical, which is a fast-growing segment used across different industries such as pharma, agriculture, and industrial chemistry. The industry can also be described by the elaborated levels of trade barriers due to the requirements of certain technical competencies and financial resources.

 Peer Comparison

Kronox Lab Sciences’ peers include: Kronox Lab Sciences’ peers include:

  • Tatva Chintan Pharma Chem Limited is an Indian chemical manufacturing company based out of Gujarat, India specializing in pharma intermediates and chemicals.
  •  Tanfac Industries Limited
  •  Neogen Chemicals Limited
  •  Sigachi Industries Limited
  •  An example of a company that falls under this category of establishing a local subsidiary is DMCC Specialist Chemical Limited.

These firms also own and operate specialty chemicals manufacturing and sales businesses, and facilitate the identification of trends in the Kronox industry as compared to its competitors.

Promoters and Management

The promoters of Kronox Lab Sciences Limited have extensive experience in the chemical industry: The promoters of Kronox Lab Sciences Limited have extensive experience in the chemical industry:

  • Jogindersingh Jaswal: Managing Director: possessing a B. Sc. degree, he has more than 30 years of experience in the chemical industry with Moran Group, Ranbaxy Laboratories, and Ranbaxy Fine Chemicals.
  •  Ketan Ramani: A full-time Director who is a commerce graduate and possesses a postgraduate diploma holder in Industrial Purchasing & Material Management in charge of finance, Purchase & Administration functions.
  •  Pritesh Ramani: Full-time Director, graduated from the discipline of science and has over two decades of experience with a major interest in sales and marketing.

 Application Process

To subscribe to the IPO of Kronox Lab Sciences, the investors can make use of the ASBA method which is an IPO application supported by a blocked amount and it can be obtained from the bank accounts. UPI, in particular, can be used for an application for swift processing. 

  •  Zerodha:  Visit the Console on Zerodha, the website, or the application; find the Portfolio option and then tap on the IPO option. Type the name of the store as Kronox Lab Sciences, then key in the UPI ID, quantity, and price provided before confirming the input. Endorse the mandate as implemented in your UPI app You might also like to determine the campaigns that have had a significant impact on changing the mandate for your UPI app.
  •  Upstox: Let me log in to the Upstox app and choose the IPO from the interface; then, the bid is complete. Indeed, check the application and confirm the mandate through UPI.
  •  Paytm Money: Go to Paytm Money and choose an IPO, place the bid for the IPO, and confirm through Mandate Approval using UPI

 Timeline

  • Open Date: : 03rd June 2024
  •  Close Date:  June 5, 2024.
  •  Basis of Allotment Date:  June 6, 2024.
  • Refunds Initiation:  June 7th 2024. 
  •  Credit to Demat Accounts: : June 7, 2024
  •  Listing Date: June 10, 2024.

SWOT Analysis

 Strengths
  •  Strong Financial Performance: To measure organizational performance, the following indicators can be used: First, the consistency of its revenues and profits over the past few years.
  • Experienced Management: That is why promoters are necessary, skilled, and have experience in the industry as well as a good track record.
  • High RONW: Debentures being a part of proprietor’s funds, its effective use to bring returns.

Weaknesses

  • Decline in Reserves: Annual figures show a similar amount yet there is a noticeable decrease in reserves from FY22 to FY23.
  •  Dependency on Key Markets: Reliance on certain categories that affect performance when consumers prefer changes with emerging trends and preferences.

 Opportunities

  • Industry Growth: There is a lucrative future predicted for the specialty chemicals industry so investment could potentially easily be expanded.
  •  Product Diversification: Delivers opportunities that enable a company to expand its range of products or the markets it is operating in.

Threats

  •  Market Volatility: Even though the success of IPOs remains the biggest hope for a company and shareholders, the prospect of capturing new returns is not guaranteed at all times due to stock market volatility.
  • Regulatory Risks: New legislation and other laws regulating the operations of businesses might influence strategies and financial outcomes.

Conclusion

Thus, the investment prospect of Kronox Lab Sciences Limited’s IPO appears to hold a lot of promise and the company possesses a strong and stable financial background, a highly qualified management team, and favorable market conditions. How these opportunities come with risks, such as the fluctuating stock market and the potential for various micro and macroindustry factors to affect return on investments. Based on the general performance and the strategic placement of this company in the instance specialty chemicals industry, the IPO should illicit considerable interest from investors.