Krystal Integrated Services Ltd IPO : SUBSCRIBE

Krystal Integrated Services Ltd IPO
  • Date

    14th March 2024 - 18th March 2024

  • Price Range

    Rs. 680 to Rs. 715

  • Minimum Order Quantity

    20

Company Overview

Providing a comprehensive range of service offerings across multiple sectors, Krystal Integrated Services Ltd. is India’s leading integrated facilities management services company, with a focus on healthcare, education, public administration airports, railways and metro infrastructure, and retail sectors. The company is one of the select companies in India that has a wide geographic presence and customer base, catering to almost all end-user segments. The company offers soft services such as housekeeping, sanitation, landscaping, and gardening; hard services such as mechanical, electrical, and plumbing services, solid, liquid, and biomedical waste management, pest control and façade cleaning; and other services such as production support, warehouse management and airport management services. The company also provides staffing solutions and payroll management to its customers, as well as private security and manned guarding services and catering services. The company is also a key solutions provider to the government sector and has a track record of executing large contracts. It is among select companies in India to qualify for and service large, multi-location government projects in sectors such as healthcare, education, airport, railways, and metro infrastructure. Operating on a B2B model and having a wide portfolio of services enable the company to design and deliver a range of customized solutions suited to the specific needs of its customers, which bolsters customer acquisition and retention capabilities. Through such a business model and by understanding the unique requirements and challenges across sectors, the company has built expertise in catering to the healthcare, education, airport, railways, and metro infrastructure sectors. Steering the company over the years, the company has a well-qualified management team that possesses robust experience in various sectors.  

Objects of the issue:

The net proceeds from the fresh issue will be used towards the following purposes:

  • Repayment/prepayment, in full or part, of certain borrowings availed of by the company;
  • Funding working capital requirements of the company;
  • Funding capital expenditure for purchase of new machinery; and
  • General corporate purposes

Investment Rationale:

Focused business model is well-positioned to capture favorable industry dynamics

Comprising about 73% of the company’s revenue, government projects form a major chunk of the company’s revenue. Having a track record of executing large contracts, the company is among the select companies in India to qualify for and service large, multi-location government projects. With the government prioritizing quality and service delivery for their clients to achieve higher customer satisfaction and an increase in outsourcing of facility management from the government segment, the integrated facility management services market in India is set to benefit from such an industry change. Over the years, the company has built expertise in catering to the healthcare, education, airport, railways, and metro infrastructure sectors, with healthcare and education forming about 57% of the company’s revenue. As a result, the company is set to benefit in the long term with its focused business model and increased government project execution.

One-stop solution provider with a comprehensive range of service offerings

The company under its integrated facilities management offerings provides soft services such as housekeeping, sanitation, landscaping, and gardening; hard services such as mechanical, electrical, and plumbing services, solid, liquid, and biomedical waste management, pest control, façade cleaning; and other services such as production support, warehouse management and airport management services. Having a comprehensive range of integrated facility management service offerings across multiple sectors, the company has a wide geographic presence and customer base, catering to almost all end-user segments. The company has been integrating its service offerings spanning across various sectors which requires shared expertise and investment in terms of technology, equipment, and special manpower training. This has enabled the company to provide a bundled solution of services to each customer that is tailored to their specific needs. The company caters to their requirements with relevant industry expertise and acts as a one-stop integrated solution for customers who consequently do not need to engage with multiple vendors or service providers.

Valuation and Outlook:

Having built expertise in catering to the healthcare, education, airport, railways, and metro infrastructure sectors, the company provides bespoke solutions for integrated facility management requirements. Being a key solutions provider to the government sector, the company is among the select companies in India to qualify for and service large, multi-location government projects. The company is one of India’s leading integrated facilities management services companies, catering to various sectors. With the outsourced integrated facility management market in India expected to grow at a CAGR of 14.6% during FY2023-28 period, the potential market size is estimated to be Rs. 1,935.9 billion. Accounting for almost 88% of the total market size, the public administration, industrial, commercial offices, healthcare, educational institutions, railways, and metro, and airport sectors are expected to drive demand for the market over the longer period. Also, with the growth opportunities arising from the government sector and the staffing and payroll management market, the company is set to derive benefits from the same. By maintaining quality standards for its services and expanding its service offerings to meet evolving industry requirements, the company has built long-term relationships with its customers across sectors. The company also has a competitive advantage as management services require an immense level of expertise, trust, and quality in the provision of service. Filling the gap of such a growing demand, the company emerges as a one-stop solution to cater to the market in the coming years. Considering the financial performance, the company’s Revenue/EBITDA/PAT grew at a CAGR of 22.5%/57.3%/86.7% during the FY2021-23 period. On the upper price band, the issue is valued at a P/E of 21.5x based on FY2023 earnings which we feel is fairly valued. We, therefore, recommend a “Subscribe” rating for the issue.