KCK Industries
KCK Industries is coming out with an initial public offering (IPO) of 15,00,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 30 per equity share.
The issue will open on June 27, 2022 and will close on June 30, 2022.
The shares will be listed on NSE Emerge Platform.
The share is priced 3 times higher to its face value of Rs 10.
Book running lead manager to the issue is Navigant Corporate Advisors.
Compliance Officer for the issue is Harsimran Jit Kaur.
Profile of the company
The company is engaged in the business of trading and distribution of high-quality combed and carded cotton yarns ranging from Ne 4 to Ne 40 in single and multifold and knitted fabrics. These yarns are suitable for applications such as apparels, undergarments, Terry Towels, Denims, Medical Fabrics, Furnishing Fabrics and Industrial Fabrics. It supply to customers, who are in fields like apparel and garment industry, industrial fabrics, furnishing fabrics, towels, Denims etc. It has a dedicated team for testing and quality control which undertakes rigorous testing and Quality Management. Trading Business segment of the company also includes trading and distribution of high quality chemicals and dyes for textiles industry, leather, and paper industries.
It also deal in Construction Chemicals. It supply are a diverse product portfolio in chemicals and dyes segment. It is in the trading business of Chemicals and dyes since its inception. It evolved its business as a startup organization that adds value at all stages of the chemicals and dyes trading value chain. It also operate as reseller organization by a team of dynamic professionals with marketing, sales and technical know-how spread across various industries.
With an addition in vertical line of business segment, the company acquired a Rice Shellar Plant of Shiv Shakti Rice Mills from Punjab National Bank situated at Sunam Lehra Road Village Khokhar, Distt Sangrur in the year 2020-21. The manufacturing plant is fully integrated and automatic and started its operations since April, 2021. The Capacity of plant is 12 Ton/ hour and current utilization is 7 Ton/ Hour. At its processing plant, it processing the non-basmati and basmati rice. It process varieties of rice with the help of state of the art plant and machinery. It serve to its consumers healthy, hygienic, tasty and nutrient rice. It is backed by a strong infrastructural base, which is well equipped with latest technology, advance machines and equipments which assist it in maintaining the quality and quantity of the rice. It has a strong focus on processing process and has a quality testing laboratory and well qualified and experienced personnel.
Proceed is being used for:
Part finance the requirement of working capital.
Meeting general corporate purposes.
Meeting the expenses of the issue.
Industry Overview
India’s textiles sector is one of the oldest industries in the Indian economy, dating back to several centuries. The industry is extremely varied, with hand-spun and hand-woven textiles sectors at one end of the spectrum, while the capital-intensive sophisticated mills sector on the other end. The decentralised power looms/ hosiery and knitting sector forms the largest component in the textiles sector. The close linkage of textiles industry to agriculture (for raw materials such as cotton) and the ancient culture and traditions of the country in terms of textiles makes it unique in comparison to other industries in the country. India’s textiles industry has a capacity to produce wide variety of products suitable for different market segments, both within India and across the world.
India’s chemicals industry is de-licensed, except for few hazardous chemicals. In the Indian chemical industry, alkali chemicals have the largest share with 69% in the total production; production of polymers accounts for 59% of the total production of basic key petrochemicals in 2019. The chemical industry is expected to contribute $300 billion to India’s GDP by 2025. India holds a strong position in exports and imports of chemicals at a global level and ranks 14th in exports and 8th in imports at global level (excluding pharmaceuticals). The chemicals industry in India covers more than 80,000 commercial products with overall market size standing at $178 billion in 2018-19. The industry is expected to grow at 9.3% to reach $304 billion by 2025 on the back of rising demands in the end-user segments for specialty chemicals and petrochemicals.
The Indian food industry is poised for huge growth, increasing its contribution to world food trade every year due to its immense potential for value addition, particularly within the food processing industry. Indian food and grocery market is the world’s sixth largest, with retail contributing 70% of the sales. The Indian food processing industry accounts for 32% of the country’s total food market, one of the largest industries in India and is ranked fifth in terms of production, consumption, export and expected growth. The total agricultural and allied products exports stood at $41.25 billion in FY21. India’s rice exports in FY22 is likely to exceed the record of 17.72 million tonne (MT) achieved in FY21 on the back of a 33% YoY jump in exports to 11.79 MT between April-October 2021. In terms of value realization, India’s rice exports increased 38% YoY to $8,815 million in FY21. In Rupees terms, India’s rice exports increased by 44% YoY to Rs 65,298 crore in FY21. Despite logistical challenges, India continued to expand its footprint in Africa, Asia and European markets thereby resulting in the largest share in global rice trade.
Pros and strengths
Diversified product portfolio: The company has a varied product base to cater to the requirements of its customers. Its Product Portfolio includes diversified variety of Yarns, Chemicals and Dyes. The company is also a supplier of Basmati and Non Basmati Rice being manufactured/ Processed by the Company. Its range of products allows its existing customers to source most of their product requirements from it and also enables it to expand its business from existing customers, as well as address a larger base of potential new customers.
Focus on quality and innovation: Quality and innovation are bed rock of successful strategy. It stress on and constantly strive to maintain and improve the quality of products. Its focus on quality and innovation helps it to complete against its peers in the segment it deal.
Quality assurance: The company conduct stringent quality tests at every stage of Processing process and the desired compositions are maintained right through the process. After Manufacturing, the products are also carefully inspected and evaluated on various parameters.
Risks and concerns
Geographical concentration: A major portion of its total sales are made in certain regions in the State of Gujarat, Delhi, Haryana and Punjab. Out of the total sales for the 9 months ended December 31, 2021, the Company has earned 4.03%, 39.86%, 15.28% and 38.26% revenue from State of Gujarat, Delhi, Haryana and Punjab respectively and such geographical concentration of its business in these regions heightens its exposure to adverse developments related to competition, as well as economic and demographic changes in these regions which may adversely affect its business prospects, financial conditions and results of operations. Factors such as competition, culture, regulatory regimes, business practices and customs, industry needs, transportation, in other markets where it may expand its operations may differ from those in which it is currently offering.
Faces excessive government regulations: Dye chemical business involves use of numerous toxic acids and its related chemical components. Usage of such intermediates is hazardous to the environment as a whole. This leads to excessive government focus and regulations to be followed in such business model. With increased compliances and regulations, Company faces challenges on many aspects such as control on use of materials, discharge of effluent treatment which may affect the business directly. Any such non-compliances may lead to imposition of penalties, fines or imprisonment. Further, operations of the Company may be suspended; withdrawn or terminated.
Face competition: The industry in which the company operate is highly competitive. Factors affecting its competitive success include, amongst other things, price, demand for its products, and availability of raw materials, brand recognition and reliability. Its competitors vary in size, and may have greater financial, production, marketing, personnel and other resources than it and certain of its competitors have a longer history of established businesses and reputations in the Indian market as compared with it. Competitive conditions in some of its segments have caused it to incur lower net selling prices and reduced gross margins and net earnings. These conditions may continue indefinitely. Changes in the identity, ownership structure, and strategic goals of its competitors and the emergence of new competitors in its target markets may impact its financial performance. New competitors may include foreign-based companies and domestic producers who could enter its markets.
Outlook
KCK Industries is engaged in the business of trading and distribution of high-quality combed and carded cotton yarns. The yarns are used for apparel, undergarments, Terry Towels, Denims, Medical Fabrics, Furnishing Fabrics and Industrial Fabrics. The company's products portfolio in chemicals and dyes includes Combed yarn and Carded yarn, Easy Care Finishing, Softener, Pigment printing,Softener, ntifoaming/Deaerating and basic chemicals. It also has a processing plant for non-basmati and basmati rice. The company has a strong network of wholesalers, semi wholesalers and retailers. The company’s management and employee team combines expertise and experience to outline plans for the future development of the company. It conducts stringent quality tests at every stage of Processing process and the desired compositions are maintained right through the process. On the concern side, modernization and technology up gradation is essential to reduce costs and increase the efficiency. The company’s technology may become obsolete or may not be upgraded timely, hampering its operations and financial conditions and it may lose its competitive edge. Besides, any change in the customer preference can render its old stock obsolete, as changes in customer preference are generally beyond its control. Some or all of its products may become less attractive in light of changing customer preferences or better products by competitors and it may be unable to adapt to such changes in a timely manner.
The company is coming out with a maiden IPO of 15,00,000 equity shares of Rs 10 each at a fixed price of Rs 30 per share to mobilize around Rs 4.50 crore. On performance front, the operating income of the Company for the year ending March 31, 2021 is Rs 3,911.58 lakh as compared to Rs 5,149.25 lakh for the year ending March 31, 2020, showing a decrease of 24.04%. Its profit after tax decreased by 39.67% from Rs 31.91 lakh in financial year 2019-20 to Rs 19.25 lakh in financial year 2020-21. Meanwhile, the company intends to improve operating efficiencies to achieve cost reductions to have a competitive edge over the peers. It also intends to expand its geographical reach and enter the large domestic market for growth opportunities of its business. In order to expand, it seek to identify acquisition targets and/or joint venture partners whose resources, capabilities, technologies and strategies are complementary to and are enabling it to establish its presence in new geographical locations.
