Kross Ltd

Risks

• Customer concentration risk - its top five customers contributed a significant portion (more than 66.00% in each of the previous three Fiscals) of its revenues. The loss of a major customer or reduction in demand for its products from any of its major customers may adversely affect its business, financial condition, results of operations and prospects.

• End-user industry risk - Demand for its products is linked to growth and trends in sales of vehicles by its customers. Decline in sales of its customers may adversely affect the demand for the company products which in turn would adversely impact its business, financial condition, results of operations and prospects.

• Product concentration risk - the company derives a portion of its revenue from the sale of trailer axle and suspension assemblies for medium and heavy commercial vehicles ("M&HCV"). Any reduction in demand for its key products on account of regulatory changes or changes in technologies including but not limited to shift in renewable/ green energy would have a material adverse effect on its business, financial condition, results of operations and cash flows.

• The company derives a substantial portion of its revenue from supply of trailer axle and suspension assembly and a wide range of forged and precision machined high performance safety critical parts for medium and commercial vehicles ("M&HCV") and farm equipment segments. Any change in demand for such components would have a material adverse effect on its business, financial condition, results of operations and cash flows.

• Manufacturing facility disruption risk - its manufacturing facilities are subject to operating risks. Any shutdown of its manufacturing facilities of its existing or future manufacturing facilities or other production problems caused by unforeseen events may reduce sales and adversely affect its business, cash flows, results of operations and financial condition.

• Manufacturing facility geographical concentration - its manufacturing facilities are located in the same geographical location and any disruptions in its manufacturing process due to local and regional factors could have an adverse effect on its business, financial condition and results of operations.

• Product quality risk - the company is subject to strict quality requirements and any product defect issues or failures by it to comply with quality standards could adversely affect its business, results of operations, cash flows and financial condition.

• Lack of long-term contracts - the company does not have firm commitment agreements with its customers. If the company customers choose not to source their requirements from it, there may be a material adverse effect on its business, financial condition, cash flows and results of operations.

• Inventory management risk - If the company fails to accurately predict the demand for its products or if customers vary or cancel production orders, its may incur costs associated with excess inventory, including towards raw material charges, elongated working capital cycle and storage costs, any or all of which can adversely impact its financial results, profitability and future prospects.

• The Company is unable to trace certain filings pertaining to historical secretarial information, minutes of board and shareholders` meetings, copies of share transfer forms and certain records from the statutory registers.

• Product pricing risk - Pricing pressure from customers may adversely affect its gross margin, profitability and ability to increase the company prices.

• Raw material sourcing risk - the company depends on a limited number of third parties for the supply of raw materials and failures by its suppliers to meet their obligations may cause change in availability and cost of raw materials which may adversely affect its business, financial condition, results of operations and prospects.

• Raw material price risk - Change in availability and cost of steel, its primary raw material may adversely affect the company`s business, financial condition, results of operations and prospects.

• Profit margin related risk - the company operates in a competitive industry where its profitability is impacted by a variety of factors including cost of raw materials, finance cost, labour costs and pricing pressure. Revenue growth may not directly lead to increased profits due to volatility in its profitability margin.

• Geographical market concentration risk - Nearly all of its revenues from operations are derived on sales made within India (more than 98.00% in Fiscal 2024 and more than 99.00% in each of Fiscal 2023 and Fiscal 2022). Its business is therefore significantly affected by fluctuations in general economic activity in India.

• Counter-party credit risk - If its customers dispute or default on their payment obligations to the company, its may be subject to adverse cash flows and may be required to spend significant amounts in recovering amounts due, in turn adversely impacting its cash flows, results of operations and future prospects.

• Reliance on third party transporters - the company relies on third-party transportation providers for distribution of its products. Any failures by any of its transportation providers to deliver its products on time, or in good condition, or at all, may adversely affect its business, financial condition and results of operations.

• Operational hazards - Activities involving its manufacturing process can be dangerous and can cause injury to people or property in certain circumstances.

• Labour related risk - Availability and cost of labour may adversely affect its business, financial condition, results of operations and prospects.

• The Company, in the past, has delayed in the payment of statutory dues.

• The company intend to utilise a portion of the Net Proceeds for funding the purchase of certain equipment, plant and machinery. The company is yet to place orders for purchase of a majority of such equipment, plant and machinery and there can be no assurance that the company will be able to place orders for such equipment and machinery, in a timely manner or at all.

• The Company intends to utilise a portion of the Net Proceeds of the Fresh Issue towards the long term working capital requirements of the Company which are based on certain assumptions and estimates.

• Objects of the Fresh Issue for which the funds are being raised have not been appraised by any bank or financial institution and any variation in the utilization of its Net Proceeds as disclosed in this Red Herring Prospectus would be subject to certain compliance requirements, including prior shareholders` approval.

• The Company will not receive any proceeds from the Offer for Sale portion.

• Capital expenditure funded through the Net Proceeds of the Fresh Issue may not yield desired benefits and its may not be able to increase the company overall revenues or profits from the operations of machinery and equipment purchased through the deployment of Net Proceeds.

• Dependence on management - the company are dependent on its Promoters, Directors and other Key Managerial Personnel and Senior Management, including other employees with technical expertise. Any loss of or its inability to attract or retain such persons could adversely affect its business, results of operations and financial condition.

• Intellectual property secrecy risk - the company does not hold any patents or other form of intellectual property protection in relation to its manufacturing processes and product designs, and its inability to maintain the integrity and secrecy of its manufacturing processes or its product designs may adversely affect its business.

• An inability to manage its growth may disrupt the company`s business and reduce its profitability.

• Competition risk - the company faces competition from both domestic as well as international players and its inability to compete effectively may have a material adverse impact on its business and results of operations.

• Industry information included in this Red Herring Prospectus has been derived from an industry report prepared by CRISIL Limited exclusively commissioned and paid for by it for such purpose.

• Intellectual property infringement risk - the company does not possess registered trademarks for its corporate logo and name and may be unable to protect ourselves from infringement of its trademarks or unauthorised passing off of counterfeit products.

• Related Party Transactions - the company has entered, and will continue to enter, into related party transactions which may involve conflicts of interest. Further, its Promoters, Directors and Key Managerial Personnel have interests in it other than reimbursement of expenses incurred and normal remuneration or benefits.

• A failures to comply with financial and other restrictive covenants imposed on it under its financing agreements may cause the company to default on these agreements, which may adversely affect its ability to conduct its business and operations.

• The company has significant amounts of short term (current) borrowings a large part of which are repayable on demand. If the company experience insufficient cash flows to enable it to fund working capital requirements or to service its short term (current) borrowings, there may be an adverse effect on its business, financial condition, results of operations and prospects.

• An adverse determination in a significant product liability or performance improvement claim or significant replacement costs may adversely affect our business, financial condition, results of operations and prospects.

• Failures or disruption of our IT systems, or cybercrimes or similar disruptions, may adversely affect its business, financial condition, results of operations and prospects.

• Exchange rate fluctuations may adversely affect its business, financial conditions, cash flows and results of operations.

• The company has substantial capital expenditure and working capital requirements and may requires additional capital and financing in the future and its operations could be curtailed if the company is unable to obtain the required additional capital and financing when needed.

• Certain non-GAAP financial measures and certain other statistical information relating to its operations and financial performance like Gross Profit, Gross Margin, EBITDA, EBITDA Margin, Return on Equity, Return on Capital Employed, PAT Margin, Gross Fixed Asset Turnover Ratio and Net Debt to EBITDA have been included in this Red Herring Prospectus. These non-GAAP financial measures are not measures of operating performance or liquidity defined by Ind AS and may not be comparable.

• The average cost of acquisition of Equity Shares for its Selling Shareholders may be lower than the Offer Price.

• The company is subject to various laws and regulations in jurisdictions where its operates including environmental and health and safety laws and regulations. Failures to comply with regulations or maintain approvals may subject it to increased compliance costs, which may in turn result in an adverse effect on its financial condition.

• If more stringent labour laws or other industry standards in India become applicable to it, its profitability may be adversely affected.

• The company manufacturing facilities are dependent on adequate and uninterrupted supplies of power and fuel; shortage or disruption in power or fuel supplies may lead to disruption in operations, higher operating cost and consequent decline in operating margins.

• Its operations are dependent on research and development. If the company is unable to continuously develop new products or optimise its processes then its ability to grow, including by expanding its presence across different end-user industries, and, or, compete effectively, might be compromised, which would have an adverse impact on its business and financial condition.

• Its operational flexibility may be limited in certain respects on account of its obligations under some of the company customer agreements, terms of purchase and established practices.

• Information relating to its production capacities and the historical capacity utilization of the company manufacturing facilities included in this Red Herring Prospectus is based on various assumptions and estimates and future production and capacity utilization may vary.

• If the company fails to maintain an effective system of internal controls, its may not be able to successfully manage, or accurately report, its financial risks.

• Its insurance coverage may not adequately protect the company from all material risks and liabilities.

• The Company, certain of its Directors and Promoters are involved in certain legal proceedings, which, if determined adversely, may adversely affect its business and financial condition and the company contingent liabilities which have not been provided for may adversely affect its financial condition.

• The company has not complied with certain corporate governance requirements in the past.

• The company has not incurred certain required portions of its profits towards corporate social responsibility requirements under the Companies Act 2013.

• Its contingent liabilities and other commitments as stated in the company Restated Financial Information could adversely affect its financial condition.

• Its Promoters and certain of the company Directors, Key Managerial Personnel and Senior Management Personnel have interests in the Company other than their normal remuneration or benefits and reimbursement of expenses.

• All of its immovable properties from where the company operates are leased to it. If the company are unable to renew existing leases or relocate its operations on commercially reasonable terms, there may be an adverse effect on its business, financial condition and operations.

• If the company is unable to raise additional capital, its business prospects could be adversely affected.

• The Company may not be able to pay dividends or issue bonus shares in the future. Its ability to pay dividends or issue bonus shares in the future will depends on its earnings, financial condition, working capital requirements, capital expenditures and restrictive covenants of its financing arrangements.

• Its Promoters and Promoter Group will retain majority shareholding in the Company following the Offer, which will allow them to exercise significant influence over it and may cause the company to take actions that are not in its or your best interest.

• A downgrade in its credit ratings, may affect the Company`s ability to avail of debt and could also impact the trading price of the Equity Shares.

• Certain of its Promoter Group entities and Group Companies are in businesses similar to its and this may result in conflict of interest with the company.

• Majority of its Independent Directors does not have prior experience of holding a directorship in a company listed on the Stock Exchanges