Evaluating Kronox Lab Sciences Ltd IPO opportunity; Should you invest?

In this analysis, we take a closer look at Kronox Lab Sciences Ltd and present you with the exclusive IPO details.

About the Issue  

Kronox Lab Sciences Ltd is set to launch its initial public offering (IPO) for equity shares, each with a face value of Rs 10. The IPO price range is set between Rs 129 and Rs 136 per equity share, resulting in a total issue size of Rs 130.15 crore at the upper price band.  

The IPO is scheduled to commence on June 03, 2024, and will conclude on June 05, 2024. The market lot size for the IPO is 110 shares, with the option to apply for multiples of this lot. Individual retail investors have the opportunity to apply for a maximum of 13 lots, equivalent to 1,430 shares or a total investment of Rs 1,94,480 assuming the upper price band.   

Objects of the Issue  

Considering that the issue is exclusively an offer for sale, it is crucial to note that the company will not directly profit from the offer proceeds. Instead, all offer proceeds will flow to the selling shareholders, distributed under the number of offered shares they sell as part of the offer.

Promoter holding  

Jogindersingh Jaswal, Ketan Ramani and Pritesh Ramani are the promoters of the company. The promoters currently hold a pre-issue shareholding stake of 99.98 per cent in the company.

Company profile  

The company produces high-purity speciality fine chemicals for a diverse range of end-user industries. The company's product range includes more than 185 items spanning various families such as phosphate, sulphate, acetate, chloride, citrate, nitrates, nitrites, carbonate, EDTA derivatives, hydroxide, succinate, and gluconate.

These chemicals are primarily used as (i) reacting agents and raw materials in the manufacturing of Active Pharmaceutical Ingredients (APIs); (ii) excipients in pharmaceutical formulations; (iii) reagents for scientific research and laboratory testing; (iv) ingredients in nutraceutical formulations; (v) process intermediates and fermenting agents in biotech applications; (vi) ingredients in agrochemical formulations; (vii) components in personal care products; (viii) refining agents in metal refineries; and (ix) ingredients in animal health products, among other applications.

These products are supplied to customers in India and more than 20 countries worldwide, including the United States, Argentina, Mexico, Australia, Egypt, Spain, Turkey, the United Kingdom, Belgium, the United Arab Emirates, and China, among others. The company operates three manufacturing facilities located in Vadodara, Gujarat, strategically positioned near the seaports of Mundra, Kandla, Hazira, and Nhava Sheva.

Financials

The company has consistently experienced significant growth over the past few years. In FY23, both revenue and net profit witnessed substantial year-on-year growth, with a notable 17 per cent surge in revenue and a considerable 21 per cent growth in net profit compared to FY22. The 9MFY24 figures were equally impressive, indicating robust growth in profitability for FY24 if the current momentum continues.

Valuation and outlook  

The issue is priced with a P/BV ratio of 8.37 times, calculated using its Net Asset Value (NAV) of Rs 16.25 as of December 31, 2023. When we calculate the PE ratio for the company by considering the annualized FY24 earnings relative to the fully diluted paid-up equity capital, the resulting PE ratio stands at 24. The company exhibited superior performance in comparison to its listed peers, taking into account both valuation and returns simultaneously.

The company's current status as a zero-debt enterprise, coupled with strong and consistent financial performance, is a significant strength. Additionally, its diverse portfolio and strategically located manufacturing facilities enhance supply chain efficiencies. Hence, we advise investors to contemplate subscribing to the offering with a long-term perspective.