Kronox Lab IPO: 10 key risks investors should know before investing to the issue

The promoters Jogindersingh Jaswal, Ketan Ramani, and Pritesh Ramani are offering 95.7 lakh equity shares for sale (OFS) in whole. The anticipated value of the IPO at the upper end of the price bandis ₹130.15 crore.

Vadodara-based Kronox is a manufacturer of speciality fine chemicals. Many sectors, including biotech, pharmaceutical formulations, active pharmaceutical components, metallurgy, agrochemicals, animal health, and scientific research and testing, employ its products for a variety of purposes.

Also Read: Kronox Lab Sciences IPO: GMP, review, subscription status, other details. Apply or not?

It operates a Research, Development, and Testing (RDT) laboratory in Vadodara, Gujarat, in addition to three production plants. In addition, the business has purchased property in Gujarat’s Dahej to build a new manufacturing facility. It sells to over 20 countries, with the US, the UK, Mexico, Australia, and Egypt being among its top destinations.

15% of the issue size has been allocated for non-institutional investors, 35% for retail investors, and half for eligible institutional purchasers. Investors may also place bids for up to 110 equity shares, with multiples of 110 equity shares thereafter.

The only book-running lead manager is Pantomath Capital Advisors. The company’s equity shares are proposed to be listed on the BSE and the NSE.

Also Read: Kronox Lab Sciences IPO fully booked within an hour of opening on strong retail, NII demand; check GMP, other details

Here are some of the key risks listed by the company in its Red-Herring Prospectus (RHP):

• Both national and international industry standards must be met by the company’s products. If these guidelines violated, clients can reject the company’s products, which could damage the company’s reputation.
• Business and prospects may be considerably and negatively impacted if the firm is unable to carry out its plan to increase sales or manufacturing capacity.
• Products from the firm are delivered in limited numbers to application sectors for particular uses. Any decrease in the demand for their products might cause them to lose customers and have an impact on their financial health.
• The revenue generated by the company’s top 20 products for the nine months ended December 31, 2023, December 31, 2022, and the Fiscal 2023, Fiscal 2022, and Fiscal 2021 was 60.49%, 70.58%, 68.62%, 69.85%, and 70.04%, respectively. Any shift in the market for those items might have a big impact on their earnings.
• The companies that sell the majority of its products are in the pharmaceutical, scientific research, and laboratory testing sectors. Any alteration in the demand or in the applications or procedures used by their clients in these sectors might result in a decline in earnings.

Also Read: Kronox Lab Sciences IPO opens on June 3; here’s what GMP hints ahead of subscription

• Any setback in creating new High Purity Speciality Fine Chemicals might have an impact on the expansion and future business of the firm.
• The P/E ratio of the company is at a premium of 31.63 times at the higher price band and 30.00 times at the lower price band, compared to the average of 67.50 for the listed industry peers.
• In comparison to other industry participants and listed peers, the company’s revenue from operations is very tiny.In addition, the company’s market share in the chemical sector is rather small. Should the firm fail to execute its expansion objectives effectively, it would continue to be a modest participant in the sector.
• Out of all of the company’s exports, the USA receives the majority of its exports. Their exports to the USA might be disrupted and their company, operations, and financial situation could be negatively impacted by any major social, political, or economic unrest in the USA, as well as by unfavourable changes to trade and tariff policy.
• Product approvals from customers in their industry are time-consuming and expensive to develop. They risk losing their resources and effort in the product development process if there is a delay in getting consumer approval or if the product is not approved.

Also Read: Kronox Lab Sciences IPO to open on June 3; check GMP, price band, issue size, key dates, more.

Disclaimer: The views and recommendations above are those of individual analysts, experts, and brokerage firms, not Mint. We advise investors to consult certified experts before making any investment decisions.

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Published: 03 Jun 2024, 05:02 PM IST