Started in 1995, Kranti Industries Limited is a Pune based company engaged in the business of manufacturing and supplying of precision machined components. With an operating history of more than two decades, KIL is primarily known for range of automotive component and non-automotive (off highway) components. It manufactures various automotive components varying from 100 MM to 1200 MM in size. The company manufactures customized products for reputed Original Equipment Manufacturers (OEMs) of diverse industries such as passenger cars, electric cars, two wheelers, tractors, construction machineries, railways, light vehicles, off-highway, heavy trucks etc. Over the years it has diversified its product portfolio and presently caters to various sectors by developing components for construction, automobile, commercial vehicle, pneumatic tool, wind mill, medical industry, etc. KIL has a diversified client base and is committed to continuing to diversify product offerings, customer base and geographical footprint, thereby minimizing exposure to individual geographies, industry sectors, customers including Graziano Transmission India Pvt. Ltd, John Deere India Pvt. Ltd, CNH Industrial (India) Private Limited formerly known (New Holland Fiat (I) Pvt. Ltd), Carraro India Pvt. Ltd, Jaya Hind Industries Limited, Endurance Technologies limited, Neosym Industry Limited (Sanaswadi) and Meltwel Scrap Traders, etc. Currently KIL has on an average 45 plus running components with around 20 turning obsolete and similar quantity under development. They have two manufacturing units adjacent to each other located at Pune, Maharashtra having a total area of approximately 4,100 square meters and 2,730 square meters respectively. The company has 155 employees on its payroll, which also includes temporary workers. As per financial performance, KIL has posted total income/net profits of Rs. 28.84 cr. / Rs. – (0.21) cr. (FY16), Rs. 29.25 cr. / Rs. – (0.93) cr. (FY17) and Rs. 46.11 cr. / Rs. 0.90 cr. (FY18). For the first half of current FY19, it has earned net profit of Rs. 1.37 cr. on a turnover of Rs. 33.22 cr. For FY16 it suffered a setback due to lower off take of components by tractor sector due to poor monsoon. As the company was having nearly 85% turnover from this segment, it felt the pinch in line with general trends. Having realised the risk of major supply to one segment, it started expanding its product range to cover other automobile and heavy equipment segment for which it made heavy capex. Due to this, FY17 too it had to suffer as new machinery and product development took time adding interest and depreciation burden. With investment and time consuming diverse product profile developments from late FY16 and FY17, it regained its prime status of niche component supplied to varied segments like four wheelers, two and three wheelers, heavy construction equipments etc; from the following fiscal. This is indicative in its performance for FY18 and H1 of FY19. For last three fiscals, it has posted an average EPS of Rs. 0.15 and an average RoNW of 0.63%. Loss for FY16 and FY17 impacted its average earnings and this has happened for the first time in the history of KIL as explained by the management. Issue is priced at a P/BV of 1.81 based on its NAV of Rs. 20.43 as on 30.09.18. If we annualise latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 12 against industry average of 27. As per offer document, it has shown Endurance Techno, MM Forging, Bharat Forge and Rico Auto as its listed peers. Although not strictly comparable, they are currently trading at a P/Es of around 53, 14, 27 and 13 (as on 12.02.19). On BRLM's front, for Fast Track Fintec Private Limited this is first IPO and there is no past track records. Company has shown improved results since FY18, RoNW is 0.63% and issue looks reasonably priced with respect to current earnings. Company is expected to give better performance in coming years due to its diversification across automobile and heavy equipment segment. But current trend for auto and auto ancillary segment is bad and most of companies of this segment are trading at bottom price of year. So we give NEUTRAL rating to this SME IPO.
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