The initial public offering (IPO) of Kronox Lab Sciences opens for bidding on Monday, June 3. The company will be offering its shares in the price band of Rs 129-136 apiece. The issue which is open for bidding until Wednesday, June 5, can be bid for a minimum of 110 equity shares and its multiples thereafter.
Kronox Lab Sciences is a manufacturer of high-purity specialty fine chemicals for diverse end-user industries. Its high purity specialty fine chemicals are used in various industries including manufacturing APIs, pharma formulations, scientific research, nutraceuticals, biotech, agrochemical, personal care , metal refineries, and animal health care.
Analysts, those tracking the issue, are mostly positive on the back of sound fundamentals, strong moats, positioning for the growth opportunities and solid relationships with customers across the globe. However, forex fluctuations, maintenance of large portfolios, regulatory issues and geopolitical tensions are key concerns for the company.
Kronox Lab Sciences’ diverse product portfolio catering to various end-user industries, coupled with high entry and exit barriers due to stringent manufacturing processes, positions it for sustainable growth. It has established strong customer relationships and strategically located manufacturing facilities, said Swastika Investmart with a subscribe rating for the issue.
“Kronox’s consistent financial performance and zero debt position solidify its financial health. However, its exposure to international markets exposes them to foreign exchange fluctuations. Additionally, their current production utilizes less than their full capacity, and their products are supplied in limited quantities for specific applications, potentially limiting revenue growth,” it said.
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The Rs 130.15 crore IPO of Kronox Lab is entirely an offer-for-sale (OFS) of up to 95,70,000 shares by its promoters Joginder Singh Jaswal, Ketan Ramani and Pritesh Ramani and the company will not receive any proceeds from the issue. Kronox Lab Sciences raised Rs 39.05 crore from six anchor investors it allocated 28.71 lakh shares at an issue price of Rs 136 apiece.
Kronox Lab Sciences is operating at a capacity utilization of close to 50 per cent of its current capacity of 7,242 MTPA for 9MFY24. They have a plan to more than double its capacity to 18,000 MTPA and will be commissioning it in the next 2 years by setting up another Unit at Dahej, said Master Capital Services.
“The company has ample room to grow in the coming years given the expansions it have in pipeline. The IPO is coming at a discount to the company’s listed peers. Given the growth prospects and the valuations, we advise to subscribe to the IPO from a medium to long term standpoint,” it said.
The company’s financial performance, driven by its robust balance sheet, positive operating cash flows coupled with zero debt position, enables it to fund its strategic initiatives, pursue growth opportunities, create higher entry barriers and diversify into new products by setting up a new manufacturing facility, said StoxBox.
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“It has consistently endeavoured to diversify their portfolio of products to cater to changing customer requirements. It also has over a decade’s track record of operations and has a robust balance sheet and cash flow position. The issue is valued at a P/E of 25.5 times on the upper price band based on FY24E earnings, which is fairly valued,” it added with a subscribe rating.
Kronox Lab offers a wide range of over 185 products, including phosphate, sulphate, acetate, chloride, citrate, nitrates, nitrites, carbonate, EDTA derivatives, hydroxide, succinate, gluconate, and others. The company has three manufacturing facilities in Vadodara, Gujarat, close to the seaports of Mundra, Kandla, Hazira, and Nhava Sheva.
These products are supplied to customers in India and more than 20 countries worldwide. Kronox Lab exports its products to countries such as the United States, Argentina, Mexico, Australia, Egypt, Spain, Turkey, United Kingdom, Belgium, United Arab Emirates, China, among others.
Kronox Lab emerges as a promising player in the chemical industry, with a solid foundation, strategic growth initiatives, and a commitment to innovation and quality. It is well-positioned to capitalize on the opportunities presented by the evolving market landscape and achieve long-term success by capitalizing on its strengths, expanding its capacity, and improving operational efficiencies, said SMC Global in its IPO note.
Kronox Lab Sciences has reserved 50 per cent of its IPO allocation for qualified institutional bidders (QIBs), while the non-institutional investors (NIIs) will get 15 per cent of the reservation. Remaining 35 per cent of the share quota shall be allocated towards retail investors of the issue.
Kronox believes there are no listed companies in India engaged in similar product segments. However, they have identified some specialty chemicals companies which are engaged in a similar product range and/or similar supply chain to the end-user industries where the company also supplies its products, said a note from JM Financial.
For the nine months ended on December 31, 2023, Kronox Labs reported a net profit of Rs 15.46 crore with a revenue of Rs 68.44 crore. The company’s bottomline came in at Rs 16.62 crore with a revenue of Rs 97.50 for the financial year 2022-23.
Pantomath Capital Advisors is the book running lead manager of the Kronox Lab Sciences IPO, while Kfin Technologies is the registrar for the issue. Shares of the company shall be listed on both BSE and NSE with June 10 as the tentative date of listing of shares on the bourses.
