Kay Jay Forgings has filed DRHP with SEBI for a Rs 360 crore IPO. Check key details including offer size, fund utilisation, BRLM, and major risks.

Kay Jay Forgings files DRHP for Rs 360 crore IPO - 3 ‘must know’ details

Auto components manufacturing firm Kay Jay Forgings has filed its draft red herring prospectus (DRHP) with market regulator SEBI to raise Rs 360 crore via an initial public offering (IPO). The offer is a book-built issue comprising issuance of fresh equity worth Rs 300 crore, while Rs 60 crore will be raised via the OFS route.

Kay Jay Forgings is engaged in the business of producing auto engine parts and forged and machined components mainly for the automotive industry.

Here are three key details about the issue:

1. Kay Forgings IPO: Offer Size and BRLM

The company aims to raise Rs 360 crore via its public issue, of which Rs 300 crore will be raised through the issuance of fresh equity shares of face value Rs 5 each. The company’s existing shareholders will offload Rs 60 crore through the OFS route.

According to the company’s DRHP, it may consider a pre-IPO placement worth Rs 40 crore. If undertaken, this amount will be reduced from the fresh equity accordingly.

The Ludhiana-based company’s IPO is being handled by PL Capital Market, while Bigshare Services is the registrar to the issue.

2. Kay Forgings IPO: Utilisation of net proceeds

Of the fresh equity of Rs 300 crore, the company will deploy Rs 118 crore towards funding its capital expenditure requirements. This includes setting up a forging facility, machining facility, and solar plant. Nearly Rs 90 crore will be utilised for the repayment of its outstanding borrowings.

The remaining capital will be utilised to fund other general corporate purposes.

3. Kay Forgings IPO: Key Risk

Over the past three fiscal years, the company has derived the majority of its revenue from its top 10 customers, making it vulnerable to the risk of client concentration.

The company is heavily dependent on the automotive sector for its revenue generation, and its manufacturing operations are concentrated in two cities—Ludhiana (Punjab) and Hosur (Tamil Nadu). Any disruptions in these areas can heavily affect its financial performance.

Risks pertaining to related party transactions, procurement of raw materials, debt repayment, licensing, and exports are also to watch out for.