Archives: Ipos

KHERL is engaged in the manufacturing of fin and tube type heat exchangers for HVAC&R industry. The company has been able to maintain healthy long term relationships with many clients on the back of its ability to cater to the varying requirements of its clients. The company also boasts a comprehensive manufacturing unit which enables end-to-end production and active quality control, ensuring cost advantages and quality products. In addition, with KHERL’s strategy to de-risk its customer portfolio, the company is aiming to expand its customer base across geographies and effectively enhance its existing product spectrum. On the financial front, the company’s Revenue/EBITDA/PAT stood at Rs. 3,083 million/585 million/391 million for FY24. The EBITDA and PAT margins stood at 18.9% and 12.6%, respectively. Additionally, the company has maintained ROE/ROCE of 29.7%/24.2%, while D/E was at 1x. On the macro front, the HVAC market in India is on a strong growth trajectory, fuelled by rapid urbanization, rising disposable incomes, various government initiatives and the increasing need for energy-efficient solutions amidst changing climatic conditions. On the back of such development, the company is well equipped to leverage multiple economic and industrial tailwinds, further strengthening its position in the market. The issue is valued at a P/E of 25.3x on the upper price band based on FY24 earnings, which is deemed to be fair. Therefore, we recommend a SUBSCRIBE rating for the issue.

The NBFC industry in India is poised for robust growth across segments such as two-wheelers, three-wheelers and MSME lending, driven by increasing finance penetration and consumer demand. With projected market share of 65% in two-wheeler financing and 35% in MSME loans, NBFCs are enhancing their competitiveness through digital initiatives and improved customer experiences, despite challenges like high default rates. Manba Finance Ltd. operates primarily in the funding business for two-wheelers and three-wheelers and has recently expanded its services to include personal loans, business loans, and used car loans. The company offers its services through over 1,100 dealers across six states. The company’s assets under management (AUM) grew from Rs. 4,958.3 million in FY22 to Rs. 9,368.6 million in FY24, reflecting a CAGR of 37.5%. Profit after tax rose from Rs. 97.4 million in FY22 to Rs. 314.2 million in FY24, with RoCE margins improving from 6.42% to 15.66%. Net NPA also decreased from 4.30% to 3.16%. With an average borrowing cost of 11.98% and lending rates above 20%, the company plans to use current issue proceeds to expand its offerings further. The current issue is priced at a P/BV of 2.3x based on FY24 book value, indicating a fair valuation. With its strategic focus on customer satisfaction and innovative products, Manba Finance is well-equipped to meet evolving market needs. We recommend a “SUBSCRIBE” rating for the issue with a medium to long-term investment perspective.

Arkade Developers is a rapidly expanding real estate developer in the Mumbai region, specializing in both new projects and the redevelopment of existing properties. As one of the leading developers in Mumbai’s micro markets, the company presents a compelling investment opportunity. This success is attributed to its strong in-house team and commitment to the timely completion of projects. Mumbai, known for its expansive and high-value real estate market, saw significant growth in housing supply and absorption rates in the past, creating ample development opportunities. Arkade Developers has demonstrated substantial financial growth, with a revenue CAGR of 66.5% from FY22 to FY24. The company’s Profit After Tax (PAT) increased impressively from Rs. 508.4 million in FY23 to Rs. 1,228.1 million in FY24. Its Return on Capital Employed (ROCE) also rose significantly from 24.3% in FY23 to 47.3% in FY24, highlighting the company’s efficient capital utilization to drive growth and enhance profitability. Furthermore, Arkade Developers is working towards becoming debt-free, which enhances its attractiveness to investors by ensuring that funds are not diverted towards debt repayment. Looking ahead, the company plans to expand into the eastern region of the Mumbai Metropolitan Region (MMR), Maharashtra, with a mix of commercial and residential developments. The current issue is priced at a P/E ratio of 15.8x on the upper price band based on FY24 earnings, which is relatively lower compared to its peers. Therefore, we recommend a SUBSCRIBE rating for this issue with a medium to long-term investment perspective.

Northern Arc Capital Ltd. has a diversified financial services platform set up primarily to cater to the diverse retail credit requirements of India’s under-served households and businesses. The company has expertise in lending across various focus sectors in India, especially in micro, small, and medium enterprise (MSME) finance, microfinance (MFI), consumer finance, vehicle finance, affordable housing finance, and agriculture finance. The company has maintained a well-diversified funding profile underpinned by established relationships with lenders and investors, a proactive liquidity management system and a strong credit rating. The company has a diversified base of lenders (including various banks, offshore financial institutions and NBFCs), and investors provide a strong base for increased funding. On the financial front, Northern Arc is among India’s diversified NBFCs in terms of AUM as of March 31, 2024, with a business model diversified across offerings, sectors, products, geographies and borrower categories. The company’s differentiated credit underwriting processes and risk models have helped deliver strong asset quality. Northern Arc’s risk models are supported by a substantial data repository comprising over 35.17 million data points, as of March 31, 2024, on portfolios across multiple sectors assessed throughout the journey and qualitative field-level insights that aid credit assessment and monitoring. According to the CRISIL Report, the company had one of the lowest gross non-performing assets (“GNPA”) of 0.45% and net non-performing assets (“NNPA”) of 0.08% as of FY24. The issue is valued at a P/BV of 1.49x on the upper price band based on FY24 book value, which is fairly valued. We, therefore, recommend a Subscribe rating for the issue on the back of a differentiated credit underwriting process, which keeps their asset quality strong and risk-adjusted returns consistent across business cycles.

The company, a dominant player in India’s logistics sector, excels in delivering comprehensive, multi-modal solutions across rail, road, sea, and air transport. Leveraging an asset-light model, it integrates services such as warehousing, customs clearance, and cargo handling, serving a broad client base of 1,647, with 71.97% of revenue concentrated among its top 10 customers. However, the company faces risks from high customer concentration, which it plans to address by diversifying into new sectors and strengthening customer relationships. Financially, it has shown robust growth, with revenue rising from Rs. 14,708.8 million in FY22 to Rs. 16,857.7 million in FY24, and EBITDA increasing significantly from Rs. 1,088.9 million to Rs. 1,518.2 million. The EBITDA margin improved from 7.4% in FY22 to 9.0% in FY24. Additionally, the company maintained a strong balance sheet, with total equity rising to Rs. 3,983.6 million and a Net Debt to EBITDA of 1.52x in FY24.  The company further plans to improve operational margins through value-added services and technology, underscoring its potential for sustained growth. Its commitment to leveraging technological advancements and expanding project logistics capabilities position it well to capitalize on the projected growth in the rail-road multi-modal sector, forecast to reach Rs. 4,667 billion by FY29. The current issue is priced at a P/E of 16.8x on the upper band based on FY24 earnings and is relatively lower than its peers. Given its strong financials, strategic initiatives, and positioning to capitalize on the expanding rail-road multi-modal sector, we recommend a “SUBSCRIBE” rating for the issue with a medium to long-term investment perspective.

India’s dynamic jewellery market thrives on the country’s deep cultural affinity for gold, which serves as a store of wealth, a hedge against inflation, and collateral for loans. As the fifth-largest importer of gold with significant reserves, India exhibits strong demand for both traditional and contemporary jewellery, fueled by rising disposable incomes and technological advancements. The jewellery market is highly seasonal, with consumer spending peaking during weddings, festivals, and agricultural harvests, requiring tailored marketing and localized product strategies. PNG, with its rich heritage and extensive product portfolio, has established itself as a leading player in the Indian jewellery market. The company offers a broad range of products, including over 10,000 SKUs in gold, 1,200 in silver, 2,700 in platinum, and 24,000 in diamond jewellery, catering to diverse customer needs across various price points. Operating 39 stores – 38 in Maharashtra and Goa and one in the US – PNG has capitalized on its strong brand presence in Maharashtra and strategically expanded into underserved markets like Tier I and Tier II cities. To address demand-supply gaps, the company plans to add 12 new stores in Maharashtra by FY26. Financially, PNG demonstrated robust financial performance, with revenue and EBITDA registering strong growth during FY2022-24 period. As on 31 March 2024 , the company’s net debt stood at Rs. 3,965 million, a portion of which is planned for repayment. On the upper band, the issue is priced at a P/E of 36.7x based on FY24 earnings, and aligns well with its peers. Given PNG’s strategic expansion in under-served markets, strong digital presence and innovative marketing strategies, we recommend a “SUBSCRIBE” rating for the issue with a medium to long-term investment perspective.

Kross Ltd. is a diversified player focused on manufacturing and supply of auto components for M&HCV and farm equipment segment. With over three decades of experience, Kross delivers customized, high-quality, and cost-effective products, fostering strong relationships with both domestic and international customers. The company’s comprehensive backward and forward integration enhances operational efficiency, quality control, and market responsiveness. The upcoming technological advancements in axle beam extrusion and seamless tube manufacturing are set to provide a first-mover advantage, further strengthening Kross’s market position. On the macro front, the growth in M&HCV and farm equipment segment will largely be driven by the country’s improving industrial activity, consistent agricultural activity & output, and government’s emphasis on industrial development. Moreover, with increasing focus on Atmanirbhar Bharat and various PLI schemes, Kross is well positioned to benefit from economical tailwinds. With the China +1 move working in favour of Indian OEMs, the company is well positioned to capitalise on such international opportunity as well, further enhancing the company’s geographical coverage. Financially, the company was able to grow its revenue from Rs. 2,975 million in FY22 to Rs. 6,203 million in FY24, indicating strong growth trajectory in its core business activity. EBITDA/PAT also rose from Rs. 240/122 million in FY22 to Rs. 808/449 million in FY24. The rising profitability highlights company’s ability to manage costs effectively. There was a noticeable hike in finance costs, but it didn’t seem to have a significant impact on the profitability of the company. The issue is valued at a P/E of 28.9x on the upper price band based on FY24 earnings, which is deemed to be fair. Therefore, we recommend a SUBSCRIBE rating for the issue.

Tolins Tyres Ltd. relies on its product development capabilities to design and deliver proprietary products such as pre-cured tread rubber and bias tyres that fir market requirements. On the back of a consumer centric business model, the company has been successfully able to build a sustainable long-standing relationship with its customers. With the help of its comprehensively integrated operations, the company is effectively able to manufacture products which aligns with the client’s requirement. Such synergies within its operation enables the company to benefit from enhanced operational efficiency and cost management. This synergy is further reflected in the company’s financial performance, showcasing its ability to adapt to market demands and maintain a competitive edge. On the financial front, the company’s Revenue/EBITDA/PAT grew at a CAGR of 41.6%/174.9%/519.8% during FY2022-24 period, driven by the company’s cost effective and efficient production capabilities. Kross maintained a ROCE of 23.6% in FY24 vs 2.6% in FY22, which highlights the company’s effective utilization of capital investment to drive growth and profitability. The company also plans to prudently manage its debt by utilizing the fund from the offering. Their commitment to manage debt is well reflected in their balance sheet, maintaining a debt/equity ratio of 1.2x in FY24 vs 8.2x in FY22. On the sectoral front, the domestic tyre industry is poised for growth due to rising vehicle demand and the expanding automobile sector, which boosts the need for replacement tyres. Additionally, the increasing acceptance of Indian tyres in international markets is driving significant growth in tyre exports. The treads industry in India, catering to this demand, is also thriving thanks to higher vehicle ownership, improved road infrastructure, and rising disposable incomes. On account of such favourable macro trends, the company is expected to ride on the sectoral tailwinds and capitalise on market opportunities. The issue is valued at a P/E of 23.7x on the upper price band based on FY24 earnings, which is deemed fair compared to its peers. Therefore, we recommend a SUBSCRIBE rating for the issue.