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Krishca Strapping Solutions

• Krishca Strapping Solutions is coming out with a 100% book building; initial public offering (IPO) of 3,320,000 shares of Rs 10 each in a price band Rs 51-54 per equity share.
• The issue will open for subscription on May 16, 2023 and will close on May 19, 2023.
• The shares will be listed on NSE Emerge.
• The face value of the share is Rs 10 and is priced 5.10 times of its face value on the lower side and 5.40 times on the higher side.
• Book running lead manager to the issue is Share India Capital Services.
• Compliance Officer for the issue is Diya Venkatesan.

Profile of the company

Established in the year 2017 at Sivakasi, Tamil Nadu, ‘Krishca Strapping Solutions Private Limited’ is a Private Limited based firm, engaged as the Manufacturer and Wholesaler of Strapping Tool, Strapping Seal, etc. Its products are high in demand due to their premium quality and affordable prices. At its Chennai facility, Heat treated high tensile Steel Straps are manufactured using state-of-the-art equipment and supervised by expert metallurgists and engineers. Its Steel strap quality parameters are in line with the American, European and Indian standards. Its integrated quality management system ensures consistency of physical and chemical properties.

Krishca Strapping Solutions is a startup venture in the business of manufacturing Steel Straps, Seals, and providing other allied packaging solutions; incorporated in December 2017 with the vision of providing total packaging solutions to steel industry. It started its commercial production at its Chennai plant in March 2020. Crafting a high-calibre product at a good value for customers is the fundamental objective of its company. Every batch of steel strap that leaves its factories also carries the weight of this objective. 

Krishca Strapping offers products and solutions that are designed to provide the best quality and service to its customers it is important to it that it consistently provides a high-quality product at a good value. Its manufacturing processes at every step of the way are leading-edge, sophisticated, and standardised to ensure consistent quality.

Proceed is being used for:

• Capital expenditure for setting up of new strapping line
• Repayment of certain secured borrowings in full availed by the company
• General corporate expenses
• Issue expenses 

Industry overview

One of the primary forces behind industrialization has been the use of metals. Steel has traditionally occupied a top spot among metals. Steel production and consumption are frequently seen as measures of a country's economic development because it is both a raw material and an intermediary product. Therefore, it would not be an exaggeration to argue that the steel sector has always been at the forefront of industrial progress and that it is the foundation of any economy. The Indian steel industry is classified into three categories - major producers, main producers and secondary producers. 

In the past 10-12 years, India's steel sector has expanded significantly. Production has increased by 75% since 2008, while domestic steel demand has increased by almost 80%. The capacity for producing steel has grown concurrently, and the rise has been largely organic. In FY22, the production of crude steel and finished steel stood at 133.596MT and 120.01 MT, respectively. The consumption of finished steel stood at 105.751 MT in FY22. In April 2022, India's finished steel consumption stood at 9.07 MT. In April-July 2022, the production of crude steel and finished steel stood at 40.95 MT and 38.55 MT respectively. In FY22, exports and imports of finished steel stood at 13.49 MT and 4.67 MT, respectively. In FY22, India's export rose by 25.1% YoY, compared with 2021. In FY21, India exported 9.49 MT of finished steel. In July 2022 exports of finished steel stood at 3.80 lakh MT.

The steel industry has emerged as a major focus area given the dependence of a diverse range of sectors on its output as India works to become a manufacturing powerhouse through policy initiatives like Make in India. With the industry accounting for about 2% of the nation's GDP, India ranks as the world's second-largest producer of steel and is poised to overtake China as the world's second-largest consumer of steel. Both the industry and the nation's export manufacturing capacity have the potential to help India regain its favorable steel trade balance.

Pros and strengths

Steel strapping: Its steel straps are crafted to ensure high quality without compromise, providing exceptional physical and geometrical properties simultaneously. Each millimeter of the strap undergoes a state-of-the-art heat treatment process using PLC-controlled automation that delivers superior elongation, shock resistance, and break strength. Its automated quenching process ensures uniform grain structure across the entire length of the strap, while the heat treatment produces a distinctive blue-shimmering oxide layer that acts as a natural barrier against corrosion. 

Partner with world-leading manufacturers of strapping tools: The company is proud to partner with world-leading and reputable manufacturers of strapping tools, ensuring that its product line represents the top manufacturers in the industry. Its complete range of steel strapping tools caters to all kinds of packaging applications and includes combination, pneumatic combination, manual tensioners and sealers, and pneumatic tensioners and sealers. Its commitment to providing the highest quality tools to its customers is reflected in its prompt and effective solutions for their packaging needs. Its service team consists of factory-trained engineers who work closely with each client to identify the most effective strapping tool for their specific application.

Continue innovation: It provides products and solutions that are aimed at bringing to its customers the best, in terms of quality and service. Its belief, commitment and ethics are defined by every employee. At Krishca Strapping, it continuous innovation with end-to-end solutions. All the tolerance levels of KRISHCA Steel Strapping meet international standards EN 13246:2001 & ASTM D-3953. 

Risks and concerns

Dependent on few customers/ suppliers: The company is substantially dependent on few customers/suppliers for its operations. As on February 15, 2023, out top 10 customers account for 74.67% of its sales, out of that top 5 customers’ accounts contributes more than 64% of the total sales. Similarly, its procurement is 92.48% from top 10 suppliers and more than 68% from top 5 suppliers. The loss of its major customers/ suppliers or a decrease in the volume of products sourced/procured may adversely affect its revenues and profitability. It cannot assure you that it shall generate the same quantum of business, or any business at all, from these customers, and loss of business from one or more of them may adversely affect its operations and profitability. 

High volatility in steel prices: The industry in which it operates is highly cyclical. Steel prices fluctuate based on macroeconomic factors, including, amongst others, consumer confidence, employment rates, interest rates and inflation rates, general levels of infrastructure activities in the region of sale etc. It aims to grow its business in a sustainable manner with a vision to create quality conscious customers and give them value for their money accompanied by technological drive. However, due to the nature of its industry it cannot ascertain the consistency of its profitability and heavy volatility in steel prices may have an adverse effect on the company‘s results of operations and financial condition.

Highly dependent on key managerial personnel:  It benefits from its relationship with its Promoter and Key Managerial Personnel and its success depends upon the continuing services of its Promoter and Key Managerial Personnel who have been responsible for the growth of its business and is closely involved in the overall strategy, direction and management of its business. Its Promoter and Key Managerial Personnel have been actively involved in the day-to-day operations and management. Accordingly, its performance is heavily dependent upon the services of its Promoter and Key Managerial Personnel. If its Promoter and Key Managerial Personnel are unable or unwilling to continue in his present position, it may not be able to replace them easily or at all. Its Promoter and Key Managerial Personnel, have over the years-built relations with various customers and other persons who are form part of its stakeholders and are connected with it. The loss of their services could impair its ability to implement its strategy, and its business, financial condition, results of operations and prospects may be materially and adversely affected. 

Outlook

Krishca Strapping Solutions is a startup venture in the business of manufacturing Steel Straps, Seals, and providing other allied packaging solutions; incorporated in December 2017 with the vision of providing total packaging solutions to steel industry. On the concern side, the company is substantially dependent on few customers/suppliers for its operations. The industry in which it operate is highly cyclical. Steel prices fluctuate based on macroeconomic factors, including, amongst others, consumer confidence, employment rates, interest rates and inflation rates, general levels of infrastructure activities in the region of sale etc.

The company is coming out with an IPO of 3,320,000 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 51-54 per equity share. The aggregate size of the offer is around Rs 16.93 crore to Rs 17.93 crore based on lower and upper price band respectively. On performance front, the company’s income from operations has increased by Rs 920.07 lakh and 97.77% from Rs 941.05 lakh in the fiscal year ended March 31, 2021 to Rs 1861.12 lakh in the fiscal year ended March 31, 2022. The increase in income from operations was on account of increase in sale of goods and export of goods. Moreover, the company’s Net Profit has increased from loss of Rs 70.17 lakh in the fiscal year ended March 31, 2021 to profit of Rs 150.54 lakh in the fiscal year ended March 31, 2022. Net profit was increased due to increase in revenue from operations and increase in other income.