Kronox Lab Sciences IPO Review: The world of specialty chemicals is a highly specialized and demanding field, where purity and precision are paramount. One such company in the sector is Kronox Lab Sciences. From pharmaceuticals to agrochemicals, Kronox Lab Sciences products play a crucial role in numerous applications.
Kronox Lab Sciences is coming up with its Initial Public Offering. The IPO will open for subscription on June 3, 2024, and close on June 5, 2024. In this article, we will look at Kronox Lab Sciences IPO Review 2024 and analyze its strengths, weaknesses, financials and GMP. Keep reading to find out!
Table of Contents
Kronox Lab Sciences IPO Review – Company Overview
Kronox Lab Sciences Limited, founded in 2008, is a manufacturer of high-purity speciality fine chemicals for a variety of end-use industries. The company product portfolio comprises 185 products, including phosphate, sulphate, acetate, chloride, citrate, nitrates, nitrites, carbonate, EDTA derivatives, hydroxide, succinate, gluconate, and others.
The company’s High Purity Specialty Fine Chemicals are used in several applications, including API manufacturing, pharmaceutical formulations, scientific research, nutraceuticals, biotech applications, agrochemical formulations, personal care products, metal refineries, and animal health products.
The following image shows the applications of the company’s products in the following industry segments:
In addition to the manufacturing of products in accordance with various domestic and international standards, the company also undertakes custom manufacturing to achieve high levels of purity, as specified by the client, having different purity levels than the prescribed industry standards.
These products are sold to clients in India and over 20 other countries including the United States, Argentina, Mexico, Australia, Egypt, Spain, Turkey, the United Kingdom, Belgium, the United Arab Emirates, and China.
The company conducts its operations through its three manufacturing facilities situated in Vadodara, Gujarat, close to the seaports of Mundra, Kandla, Hazira, and Nhava Sheva. As of December 31, 2023, the facilities cover 17,454 sq.m. and have an installed capacity of 7,242 TPA.
Kronox Lab Sciences IPO Review – Industry Overview
The chemical industry is a vital part of the global economy and is essential in almost every aspect of modern life. It serves various sectors including agriculture, construction, automotive, FMCG, consumer durables, electronics, healthcare, and more.
The Indian chemicals industry, excluding pharmaceuticals, had a value of output of around Rs. 9.10 lakh crores in FY22, accounting for 8.4% of the manufacturing sector’s output value at constant prices, compared to 7.9% in FY18. The chemical and chemical products, excluding pharmaceuticals, showed a Compound Annual Growth Rate (CAGR) of 8.8% from FY18 to FY22.
Furthermore, according to the Department of Chemicals and Petrochemicals of the Government of India, India is ranked 11th in the world for chemical exports (excluding pharmaceutical products) and 6th for chemical imports (excluding pharmaceutical products).
Kronox Lab Sciences IPO Review – Financials
If we look at the financials of Kronox Lab Sciences, we can find out that it is relatively a small company with its assets standing at ₹54.03 crores in March 2023.
Coming to its financials, we can see its revenues have increased from ₹63.24 crores in FY21 to ₹97.50 crores in FY23. The rise in revenues is accompanied by an increase in profits from ₹9.73 crores in March 2021 to ₹16.62 crores in March 2023.
Along with the rise in revenues and profits, the company reported a slightly increased PAT margin of 17.04%. This implies that the company has been able to effectively manage its costs along with its rising business.
In the nine months of FY24, the company’s revenues and net profits stood at ₹68.44 crores and ₹15.47 crores respectively with its PAT margins standing at 22.60%.
As of FY23, the company reported a of 37.19% and RoCE of 49.86% indicating an excellent return on shareholders’ capital and efficiency in its resource utilization. Furthermore, the company enjoys a zero debt status which which provides it with sufficient leverage to avail debt funding in future.
Peers of the Company
The company believes that they have no listed companies in India engaged in similar product segments. However, it has identified the following speciality chemicals companies which are engaged in similar product ranges and/or similar supply chains to the end-user industries where Kronox Lab also supplies its products.
Strengths of the Company
- The company manufactures a wide spectrum of high-purity speciality fine Chemicals with applications across industries like pharmaceuticals, scientific and laboratory research, nutraceuticals, biotech, agrochemicals, personal care, metallurgy and animal health.
- The company has maintained a long-standing relationship with its customers, from which its top 20 customers revenue amounted to ₹49.68 crores in FY23 with the contribution standing at 67.05% as of FY23.
- The products manufactured by the company require deep domain knowledge to meet the desired purity level. Furthermore, due to the nature of the application, its processes and products are subject to, and measured against established domestic and international standards and stringent specifications of customers. This creates an entry barrier for new entrants in the sector.
- The company’s financials have shown consistent growth in revenues and profit over the past three years with an increase in its operations and effective management. Furthermore, the company is debt-free which provides it with sufficient leverage to avail debt funding in future.
- The company has three strategically located Manufacturing Facilities which are located in Padra, Vadodara, Gujarat, and close to several ports including Kandla, Mundra, Hazira and Nhava Sheva. This ensures that the company has ready access to port facilities and can expediently import its raw materials and export its products.
Weaknesses of the Company
- The company’s products are supplied in limited quantities for specific use by application industries. Any reduction in the requirement of the products by the customers may result in loss of business which can impact its financial performance.
- Though the company’s product portfolio only consists of more than 185 products, its sales are dominated by its top 20 products. If there is a fall in demand for any of these products, the company’s business will be affected.
- The company does not have long-term agreements with any of its customers. Furthermore, it derives 50.68% of its revenue from its top 10 customers in FY23. Any reductions in the demand by these customers can adversely impact the business.
- The company is dependent on third-party transportation and logistics service providers for delivery of raw materials to the manufacturing facilities as well as delivery of our products to its customers. Any delay in the delivery of the products or raw materials or increase in the charges of these entities could adversely affect the business.
- The company majorly exports its products to the USA which contributed 22.93% of the company’s revenue in FY23. Any significant social, political or economic disruptions in the USA or adverse changes in the trade and tariff policies could disrupt the exports to the USA and may adversely affect the company.
Kronox Lab Sciences IPO Review – GMP
The shares of Kronox Lab Sciences traded at a premium of 57.35% in the grey market on May 30, 2024. The shares tarded at Rs.214. This gives it a premium of Rs 78 per share over the cap price of Rs 136.
Kronox Lab Sciences IPO Review – Key IPO Information
| Particulars | Details |
|---|---|
| IPO Size | ₹130.15 Cr |
| Fresh Issue | Nil |
| Offer for Sale (OFS) | ₹130.15 Cr |
| Opening date | June 3, 2024 |
| Closing date | June 5, 2024 |
| Face Value | ₹10 per share |
| Price Band | ₹129 to ₹136 per share |
| Lot Size | 110 Shares |
| Minimum Lot Size | 1 |
| Maximum Lot Size | 13 (1430 shares) |
| Listing Date | June 10, 2024 |
Promoters: Jogindersingh Jaswal, Ketan Ramani and Pritesh Ramani
Book Running Lead Manager: Pantomath Capital Advisors Private Limited
Registrar to the Offer: KFin Technologies Limited
The Objective of the Issue
As the entire IPO is carried out through an offer for sale, the entire proceeds will be distributed among the promoters as per their respective participation. Furthermore, the company expects to enhance its visibility and brand image as well as provide liquidity to its existing Shareholders through this IPO.
Conclusion
In this article, we looked at the details of Kronox Lab Sciences IPO Review 2024. The company exhibits strengths such as a diverse product portfolio, strategic manufacturing facilities, and impressive financial performance.
But at the same time one should also consider the risks associated with customer concentration, dependence on exports, and the competitive nature of the chemical industry. What do think the future holds for the company? Are you applying for the IPO? Let us know in the comments below.
Written by Aaron Vas
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