Krystal Integrated Services IPO Review: Krystal Integrated Services is coming up with its IPO issue of Rs. 300.13 Cr which will open on 14th March 2024. The issue will close on 18th March and be listed on the exchange on 21st March 2024. This article will analyze the strengths and weaknesses of the Krystal Integrated Services Limited IPO Review 2024. Keep reading to find out!

Krystal Integrated Services IPO Review – About The Company

Apart from these services, the Company also provides production support services, warehouse management, and airport management services, which include multi-level parking & airport traffic management services. In staffing services, the Company provides payroll management as well as private security services and catering services.

The Company operates on a Business-to-Business model across 16 states and 2 union territories of India. It has so far provided its services to 135 hospitals and medical colleges, 228 schools & colleges, 1 airport, 4 railway stations, and over 30 metro stations. 

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Some of the notable institutions to whom Krystal has provided its services include Maha Mumbai Metro Operation Corporation Ltd and Brihanmumbai Municipal Corporation. The Company provides bespoke solutions to these institutions sourcing everything from the OEMs themselves and maintaining long-term relationships with the businesses. 

Krystal Integrated Services IPO Review – About the Industry

The global outsourced facility management  Market for CY2022 is valued at USD 890.00 billion and has recorded a growth of 2.1% CAGR from CY2018 – CY2022. Asia is the largest market globally with a share of 33% as of CY2022. It is expected to reach USD 479.6 billion by CY2027 at a 10.6% CAGR, with China and India being the main growth drivers. 

Industrial, Public Administration, defense, and railways are the three top-end user segments of the Integrated Facilities Market in FY23, with a combined market share of 53.1%. Other prominent segments were commercial offices, healthcare, educational Institutions, airport retail and residential segments.

Indian Integrated Facilities Management Market is highly fragmented with close to 400 – 500 companies operating across the country. There are around 6 large companies in the Tier 1 category that have their presence across geographies and control about 9.4% of the total market. 

Tier 1 companies have a country-wide presence serving almost all the end-user segments and have a vast client base. Around 60 – 70 companies belong to Tier 2 and have a regional presence while more than 400 companies belong to the Tier 3 category and operate in a small geographic zone, for example, a single city or town. 

The market also witnesses the presence of both international and domestic companies. International companies’ sub-contract the majority of their services to gain access to various markets, manpower, and customers in the region. 

Krystal Integrated Services IPO Review – Financials

During FY23, the Company earned a gross revenue of Rs. 708 Cr, which increased by 28% from Rs. 553 Cr in FY22. Since FY21, the revenue of the Company has increased by 23%. Krystal Integrated Services earns nearly 38% of its revenue from the healthcare segment, which has also been growing at a CAGR of 29% since FY21.

Education contributes to 21% of revenue followed by Airports, railways, and metro infrastructure which contribute to around 7% of revenue. Net Profits of the Company have increased by 46%, from Rs. 26 Cr in FY22 to Rs. 38 Cr in FY23. The net profits have increased significantly as a result of reduction in Employee expenses reducing as a percentage of revenue, from 85.3% in FY22 to 83.65% in FY23.

As the Company is into providing a service to its customers via its contractual employees, it operates on single-digit margins of 6-8%. Net Profit Margins have improved from 3.5% in FY21 to 5.4% in FY23.

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Krystal Integrated Services IPO Review – Key Players 

In terms of a peer-to-peer analysis, Krystal Integrated Services is the smallest listed peer in terms of revenue. Quess Corp and SIS Ltd are the leaders of the industry. However, the leaders of the industry do not have a return on Net Worth as high as that of Krystal at 24%. If the Company continues to scale its profits further, RoNW is expected to know even more. 

Nevertheless, at the higher end of the price band of Rs. 715 compared to a basic EPS of Rs. 33.33, the Company will be valued at a Price-to-Earning of 21.45x, which is a lot higher than the median PE of 15.16x of its peers.

RHP of Krystal Integrated Services
Source: RHP of the Company

Strengths of the Company 

  1. Comprehensive range of solutions: The company offers a multitude of solutions across different fields of business. This allows Krystal to cater to a variety of customers
  2. Focused business model: The Company business is generally focused on developing deep and strong relationships among a few of the largest clients. It also has a track record of undertaking and successfully executing orders on a really large scale.
  3. Wide reach across India: As of September 2023, the Company has served over 2160 customer locations across 16 states & 2 union territories. This allows the Company to take up outsourcing jobs and deploy its workforce across the country.
  4. Strong track record: The Company’s performance is backed by a strong financial track record in the past three years. Revenue scaled by 20% and an expansion of margins caused Net Profits to increase by as much as 40%.

Weaknesses of The Company

  1. Customer Concentration Risk: The Company’s top 5 customers contribute to 35% of revenue while the top 10 customers bring in over 60% of revenue. This kind of exposure to the largest client can be detrimental to revenue in case it loses its top clients.
  2. Exposure to Government Contracts: A significant portion of the Company’s revenue, nearly 74% was from the government contracts signed by the Company. The Company has to get a proper balance across both government & non-government contracts
  3. Geographical Concentration Risk: Although Krystal operates its business in 16 states, ~80% of the Company’s revenue comes from just two Indian states, Maharashtra and Tamil Nadu.
  4. Operational Risk due to the inherent nature of business: The operations undertaken by the business such as private security, and facility management are dependent on the performance of the Company personnel. However, any disruption or defect from his end could have a monetary & reputational impact on the Company.

Krystal Integrated Services IPO Review – GMP

As of the date of writing this article, the Grey Market Premium for the shares was Krystal Integrated Services Ltd has not yet been published. We will update the article with the respective expected as soon as its GMP is updated.

Krystal Integrated Services IPO Review – Key Information

ParticularsDetails
IPO SizeRs. 300.13 Cr
Fresh IssueRs. 175 Cr
Offer for Sale (OFS) Rs. 125.13 Cr
Opening date14 March 2024
Closing date18 March 2024
Face ValueRs. 10
Price BandRs. 680 - 715
Lot Size20 Shares
Minimum Lot Size1 Lot (20 Shares)
Maximum Lot Size13 Lots (260 Shares)
Min. InvestmentRs. 14,300
Listing Date21 March 2024

Promoters: Prasad Minesh Lad, Neeta Prasad Lad, Saily Prasad Lad, Shubham Prasad Lad, and Krystal Family Holdings Pvt Ltd. 

Book Running Lead Manager: Inga Ventures Pvt Ltd.

Registrar to the Offer: Link Intime India Pvt Ltd

The Objective of the Issue

  1. Rs. 10 will be utilized for repayment of borrowings
  2. Rs, 100 Cr will be utilized for the working capital requirements of the Company
  3. Rs. 10 Cr will be utilized for the purchase of new machinery.
  4. The remaining amount will be utilized for General Corporate purposes

Conclusion

Krystal Integrated Services is a contract-based management outsourcing  Company, that provides a comprehensive range of personnel solutions. The Company is an organized giant in a rather unorganized and fragmented market, with a strong financial performance. 

While Krystal Integrated Services has wide service offerings, a focused business model, and a strong presence across India, it also faces certain weaknesses. These include customer concentration risk, exposure to government contracts, geographical concentration, and operational risks inherent to the nature of its business.

Overall, the growth opportunities of the business look quite dismal as they totally depend on the overall industry to grow, which is currently growing at a very slow rate. With that said, what do you think about the Company? Let us know in the comments below if you will apply or avoid Krystal Integrated Services IPO.

Written by Nasir Hussain

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