Krystal Integrated Services Ltd IPO | News | Overview | Verdict

IPO listed on 21 Mar'24

Krystal Integrated Services Ltd

Minimum Investment

₹ 14,300 / 20 shares

Grey market premium

₹ 35 (5% premium)

Issue price

₹ 715

Listing price

₹ 795

Listing day %

Listing on

Mar 21, 2024

Our Verdict:

Avoid

Krystal Integrated Services Ltd boasts a diverse clientele, extensive geographic footprint, and a history of strong financial performance. Nonetheless, several critical issues demand attention. Its dependency on a few clients, notably through government contracts won by competitive bidding, introduces a high level of risk concentration. The facility management sector is highly competitive, with significant operational risks.
In terms of valuation, the IPO appears to be fully priced with a Price-to-Earnings (P/E) ratio of 40x based on FY23 earnings, thus discounting near-term triggers. Moreover, the grey market premium (GMP) for the issue suggests a lacklustre debut on the stock exchanges.
Considering these factors and the prevailing market conditions, it may be prudent for investors to refrain from investing in this offering for now. It is advisable to wait for better entry opportunities after the listing, once the market shows definite signs of improvement, particularly in the mid-cap and small-cap space.

About the company

Founded in

1 Dec'00

Managing director

Neeta Prasad Lad

Krystal Integrated Services Ltd (KISL) provides integrated facilities management services across India, with a strong presence in sectors including healthcare, education, government services, airports, railways, metro systems, and retail.
KISL offers a comprehensive suite of services encompassing soft services like housekeeping, sanitation, landscaping, and gardening, alongside hard services including mechanical, electrical, and plumbing solutions. Additionally, the firm specializes in the management of solid, liquid, and biomedical waste, pest control, façade cleaning, and extends its expertise to include production support, warehouse management, and airport management services.

STRENGTHS

Impressive Financial Growth: KISL has demonstrated consistent growth in its financial performance, with a Compound Annual Growth Rate (CAGR) of 23% in revenue from operations from FY21 to FY23. This growth period also featured a 35% increase in EBITDA and a substantial 51% rise in net profit.
Strong Return Metrics: KISL has experienced significant enhancements in return ratios, with its Return on Networth (RoNW) increasing from 12.37% in FY21 to 23.53% in FY23. Additionally, the Return on Capital Employed (RoCE) has grown from 19.01% in FY21 to 28.82% in FY23.

RISK FACTORS

Revenue Concentration: KISL's operational income heavily relies on a small group of clients. Specifically, for FY23, its largest single client, top five, and top ten clients accounted for 34.91%, 59.19%, and 72.58% of its operational revenue, respectively. Losing any major client could significantly impact the firm’s operational outcomes and financial health.
Dependence on Government Contracts: A substantial portion of KISL’s income is derived from government contracts, which are awarded through competitive bids. These contracts constituted nearly 74% of its total operational revenue for FY23. The firm faces uncertainties regarding its ability to secure, compete for, and maintain such contracts and relationships.
Accounts Receivable: A large fraction of KISL’s assets is tied up in trade receivables, amounting to Rs 217.51 crore and Rs 149.61 crore as of H1FY24 and FY23. These figures represent 48.35% and 43.56% of the total assets for the respective periods. Despite not experiencing significant write-offs in the past three years, there is no assurance against future payment defaults by clients, which could negatively influence the company's profit margins and cash flow.
Working Capital Needs: KISL operates with high working capital demands, noted at Rs 122.85 crore and Rs 38.54 crore as of September 30, 2023, and March 31, 2023, respectively. Insufficient cash flow to support these needs could adversely affect its business operations.
Operational Cash Flow Challenges: KISL experienced negative cash flows from operational activities in the first half of FY24. Continuation of such negative cash flows could pose a risk to the company's financial health and operational stability.

Financials

All Values are in Cr.

Issue details

Issue type

Mainstream

Issue size

₹ 300.13 crore

Fresh Issue

₹ 175 crore

OFS

₹ 125.13 crore

Price range

₹ 680 - 715

Lot size

20 shares

Issue Objective

The net proceeds from the fresh issue are intended to be utilised towards:

Repayment and/or pre-payment of certain borrowings availed by the company;
Funding the working capital requirements of the company;
Funding capital expenditure for purchase of new machinery; and
General corporate purposes.

Dates

Bidding open

14 Mar'24

Bidding close

18 Mar'24

Allotment date

19 Mar'24

Refund date

20 Mar'24

Listing

21 Mar'24

IPO Reservations

Qualified institutional buyers

<50%

Non-institutional investors

>15%

Retail individual investors

>35%

Read the Offer Document

This document has been issued by Liquide Solutions Private Limited for information purposes only. It does not have regard to specific investment objectives, financial situation and the particular needs of any specific person who may receive this document. Investors should seek personal and independent advice regarding the appropriateness of investing in any of the funds, securities, other investment or investment strategies that may have been discussed or referred herein and should understand that the views regarding future prospects may or may not be realized. In no event shall Liquide Life Private Limited and / or its affiliates or any of their directors, trustees, officers and employees be liable for any direct, indirect, special, incidental or consequential damages arising out of the use of information / opinion herein.

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