Kross Ltd Management Discussions

INDIAN ECONOMY

Indias economy is expected to grow at a solid 6.5% in FY 2024-25, underscoring the strength of its domestic fundamentals. This momentum stands out against a challenging global landscape shaped by trade tensions and tariff-related uncertainties. Decisive and timely policy actions have played a key role in cushioning the impact of external pressures.

Indias economic stability is underpinned by strong domestic consumption, with rural demand providing a key buffer against global volatility. A thriving agricultural sector, coupled with targeted government programs, has amplified rural spending and helped sustain economic momentum.

Indias macroeconomic foundation continues to gain strength through the combined impact of structural reforms, rapid digital advancement, and large-scale infrastructure development. These drivers are shaping the trajectory of long-term growth and reinforcing economic stability. At the same time, achieving greater global competitiveness in manufacturing will depend on accelerating the reform agenda to attract larger-scale investment.

In this context, the automotive industry is positioned for significant growth. Increasing household incomes and improved consumer sentiment are driving demand, while policy support and favorable market signals are enabling further expansion. The sector is emerging as a critical lever in Indias broader economic development strategy.

Outlook

Indias projected GDP growth of 6.5% between FY 2025-26 and FY 2027-28 signals a determined stride toward the Viksit Bharat @ 2047 vision, an ambitious national agenda to transform India into a fully developed economy by its 100th year of independence. This transformation agenda is defined by its focus on inclusive development, technological leadership, and equitable access to progress.

Sustained expansion at this pace aligns with the countrys goal of reaching a US$ 30 Tn economy by 2047, enabling multi-sectoral growth and a future of greater opportunity, improved infrastructure, and enhanced quality of life across the population.

(Source: https://www.ubs.com/global/en/investment-

bank/insights-and-data/2024/indias-outlook-2025-2026- story.html)

INDUSTRY REVIEW

At the same time, structural efficiencies introduced in recent years are reshaping the industrys growth path. The implementation of the Goods and Services Tax (GST), development of better road networks, and commissioning of the dedicated freight corridor (DFC) are expected to enhance logistics efficiency, which may moderate the pace of volume growth over the long term.

Nevertheless, the broader outlook remains favorable. The governments ‘Make in India push, coupled with infrastructure improvements and stronger corporate capital expenditure, is expected to reinforce a healthy capex cycle beyond FY 2023-24. With supportive policies, rising demand for freight movement, and technology adoption in line with emission and efficiency norms, the MHCV industry is poised to sustain promising growth in the years ahead.

Growth Drivers

Rising Freight Rates Supporting Recovery of Deferred Demand

In FY 2023-24, fuel accounted for nearly 55% of transport operators expenses. Diesel prices rose by about 2%, while freight rates increased by approximately 6%, improving margins for transporters. This trend, combined with a rebound in freight activity, is driving the recovery in Commercial Vehicle (CV) sales.

Government Push on Infrastructure Development

The National Infrastructure Pipeline (NIP) outlines capital investment of INR 111 Lakh Cr. during FY 2020-25, targeting upgrades across transport, energy, water, and urban infrastructure. This large-scale investment is driving sustained demand in the CV segment, particularly Medium and Heavy Commercial Vehicles (MHCVs), by boosting logistics and industrial activity.

Focus on Infrastructure and Higher Mining Output to Drive Tipper Demand

In FY 2023-24, capital outlay for infrastructure ministries rose by 28% over the FY 2022-23 revised estimate, reaching INR 18.6 Lakh Cr. Road construction by NHAI is targeted to increase to 14-15 km per day by FY 2026-27, up from around 11 km per day in FY 2020-21. Simultaneously, coal production is expected to grow at a CAGR of 4.5 to 5.5% and iron ore mining at 3.5 to 4.5% from FY 2023-24 to FY 2028-29, driving demand for tippers in both construction and mining sectors.

Transporter Utilization and Profitability as a Core Demand Driver

Commercial vehicle demand is directly linked to fleet utilization, which depends on freight volumes generated from agriculture, manufacturing, and ports. Favorable regulatory policies, improved road infrastructure, and consistent freight availability enhance fleet efficiency and encourage fleet renewal and expansion.

Scrappage Policy as a Long-term Demand Enabler

The vehicle scrappage policy introduced by the Ministry of Road Transport and Highways (MoRTH) is designed to remove older, inefficient, and high-emission vehicles from circulation. Initially proposed in August 2018, the policy targets vehicles over 15 years of age, with particular emphasis on those registered prior to April 2005. To promote adoption, the government has introduced incentives, including waivers on registration charges for new vehicle purchases following the scrappage of eligible units. However, the scrappage policy is yet to take off, with limited traction seen in terms of large-scale implementation and adoption.

Growth Drivers

Farm Mechanization Varies across States

States like Punjab, Haryana, and Uttar Pradesh have achieved high mechanization levels, with current demand largely driven by replacements. In contrast, eastern states remain underpenetrated, offering significant room for growth, especially for first-time tractor buyers in less saturated markets.

Increasing Non-Farm Usage of Tractors

Nearly 20% of tractors in India are now used for non-agricultural purposes such as haulage, construction, and mining. Farmers are increasingly renting out their tractors when idle, improving asset utilization and generating secondary income. This trend is set to accelerate as equipment productivity gains priority.

Rental Model and Low-Cost Tractors Key to Penetrating Fragmented Land Holdings in India

With over 80% of Indian farms classified as small or marginal, outright tractor ownership remains a challenge for many. Low-cost tractors and rental models are bridging this gap. Government-supported rental apps are also enabling flexible access to equipment, driving inclusive mechanization.

Segment-Wise Tractor Sales Shifting toward Higher Horsepower

Sales continue to be led by the 41-50 hp segment, valued for its adaptability across farming and commercial tasks. Regional factors like irrigation coverage, soil type, and average land size influence horsepower demand. Better-irrigated and tougher terrain areas tend to favor higher hp models, while smaller farms with softer soils prefer lower hp variants.

Growth Drivers

Surge in Logistics and E-Commerce

Rapid growth of third-party logistics and e-commerce is fueling demand for trailers—and by extension, for durable, high-capacity axles.

Infrastructure Expansion and Regulatory Support

Government initiatives like the Trailer Code and enhanced road networks, along with increased permissible axle loads, are enabling higher payloads and safer operations.

Focus on Cost- and Fuel-Efficiency

Operators are shifting from rigid trucks to trailer combinations to achieve the lowest cost per ton-kilometer, driving adoption of lighter, longer-lasting axle technologies.

COMPANY OVERVIEW

Established in 1994, Kross Limited (also referred to as ‘Kross or The Company) is a leading manufacturer and supplier of high-performance, safety-critical components serving the medium and heavy commercial vehicle (M&HCV) and farm equipment sectors. Over the years, the Company has earned a strong reputation for reliability and engineering excellence, positioning itself as a trusted partner to major original equipment manufacturers (OEMs), Tier 1 suppliers, domestic dealers, and fabricators throughout India. Headquartered in Jamshedpur, Jharkhand, Kross operates five fully integrated manufacturing facilities. This backward integration ensures end-to-end oversight of its manufacturing processes, supporting both quality control and operational efficiency. The Companys product portfolio is both diverse and highly specialized, encompassing trailer axle and suspension assemblies, axle shafts, companion flanges, anti-roll bars, stabilizer bar assemblies, suspension linkages, differential spiders, bevel gears, planet carriers, inter-axle kits, rear end spindles, and a wide range of tractor components such as hydraulic lift arrangements, power take-off (PTO) shafts, and front axle spindles. Each of these components plays a critical role in ensuring the safety, durability, and performance of commercial vehicles and agricultural machinery.

Krosss commitment to global standards is reflected in its certifications: IATF 16949:2016 for quality management, ISO 14001:2015 for environmental responsibility, and ISO 45001:2018 for occupational health and safety. These accreditations are the result of a disciplined approach to manufacturing and an uncompromising focus on process excellence. Supporting this effort is the Companys dedicated Research and Development team, which continually drives product innovation to meet the changing needs of its customers and the industry at large.

With an expansive manufacturing infrastructure and a broad, loyal client base, Kross continues to strengthen its position as a specialist supplier of safety-critical components for the M&HCV and farm equipment sectors. The Companys consistent delivery, technical expertise, and strategic approach make it a preferred partner in one of the most demanding segments of industrial manufacturing.

Strategic Capacity and Capability Expansion

Kross is strategically expanding its capabilities across forging, casting, and machining to support accelerated growth in its core segments: exports, trailer axles and suspension assemblies, and high-precision components. These investments are not only strengthening the Companys current production capacity but are also laying a robust foundation for its medium and longterm strategic goals. In FY 2024-25, Kross commissioned a 2,000-ton screw press, and a 1,000-tonne press, furthermore, the Company plans to install a 1,600-tonne press plus a 2,000 ton to strengthen forging capabilities a move that significantly enhances its ability to meet rising demand and strengthens its long-term manufacturing readiness.

Axle Beam Extrusion Plant

In a major technological step forward, Kross is establishing Indias first Axle Beam Extrusion Plant, with commercial production slated for FY 2025-26. This facility will leverage advanced extrusion technology to scale trailer axle and suspension assembly output from 5,000 to 7,500 units per month, with the flexibility to ramp up to 10,000 axle beams per month. The extruded design will result in a lighter and stronger component, delivering estimated cost savings of 5% and contributing to improved operational margins without affecting pricing stability.

The extrusion plant also opens the door to a new product category for Kross: tag and dead axles for rigid vehicle applications. This segment, previously unaddressed by Kross, presents a high-potential growth opportunity. As the extruded axle reaches production readiness in FY 2025-26, Kross will be positioned to pursue export opportunities in the global trailer axle market, a space currently dominated by Chinese manufacturers who utilize similar extrusion technologies. With this move, the Company intends to diversify its product offerings, while gaining a foothold in an established international market.

Seamless Tube Manufacturing Facility (Mill 219)

Reaffirming its commitment to backward integration, Kross is setting up a seamless tube manufacturing plant in the Adityapur Industrial Area, Jharkhand. The project involves a planned investment of INR 1,670 Mn, funded through a combination of internal accruals and debt. The facility will house Mill 219, designed to manufacture seamless tubes with diameters ranging from 115 mm to 220 mm.

This strategic initiative is aimed at reducing reliance on external suppliers, while enhancing control over input quality and availability. In-house tube production is expected to improve cost efficiency by 3-4% and ensure a steady supply of critical materials for internal use. With an annual installed capacity of 1,20,000 tons, the plant will also cater to external customers in key sectors, including automotive, oil & gas, and general engineering. Commercial operations are scheduled to commence in FY 2026-27, with significant revenue contribution anticipated from FY 2027-28 onward.

Segment-Wise Performance

Trailer Axles and Suspension Assemblies

This segment contributed 44.1% to Kross total revenue in FY 2024-25. Despite a 5% contraction in the domestic trailer market, the Company achieved a modest increase in segmental revenue. Axle sales rose from approximately 31,000 units in FY 2023-24 to 32,500 units in FY 2024-25. March 2025 marked the highest monthly output, with production reaching close to 4,200 units. The Company continues to see growing interest in air suspension systems and has developed a complete axle portfolio ranging from 12-ton to 18-ton capacities.

Kross has established a strong presence in key states such as Rajasthan, Chhattisgarh, and Jharkhand, where it is a preferred brand for tipping trailer applications. The Company is also preparing to launch tipping jacks in the second half of FY 2025-26 to deepen its integration within the trailer ecosystem.

Component Business (M&HCV and Tractor Components)

This segment contributed 55.9% of total revenue in FY 2024-25. Kross manufactures a diverse range of components including axle shafts, coupling flanges, differential spiders, rockshafts, and joint assemblies. Capacity utilization across key lines varied between 58% and 85% during the year. The Company has seen steady growth in business from established OEMs such as Dana and International Tractors Limited, driven by both volume expansion and product diversification.

Exports

Export revenue stood at INR 197 Mn in FY 2024-25, contributing 3.2% to the Companys total revenue. The export business has gained early traction through consistent supply of universal joint crosses and successful customer engagements in 37

Europe. Kross is targeting an export revenue share of 5% in FY 2025-26. With the introduction of the extruded trailer axle beam, the Company expects to access global trailer OEMs, particularly in markets that demand high-precision, one-piece axle designs.

New Product Development

The upcoming launch of tipping jacks marks a strategic expansion within the trailer segment. Targeting high-volume states like Rajasthan and Chhattisgarh, Kross is leveraging its existing customer base to gain early market share. Realizations are estimated at INR 1.15 Lakh per unit. Initial volumes in FY 2025-26 are expected to reach 300-400 units, with a target of scaling up to 800 units per month over the medium term.

Other Initiatives

Product development is ongoing in new categories such as tag axles and load-bearing dead axles. These offerings will be manufactured using the extruded beam platform, allowing Kross to deliver lighter, stronger, and globally competitive products. These new categories are expected to support both domestic demand and long-term export ambitions.

Discussion on Financial Performance with Respect to Operational Performance

Kross delivered a stable financial performance in FY 2024-25, supported by targeted operational execution across key manufacturing segments. Total revenue stood at INR 6,204 Mn, nearly flat compared to INR 6,202 Mn in FY 2023-24, as volume growth in the trailer axle business offset muted demand in certain component categories.

EBITDA improved marginally to INR 813 Mn in FY 2024-25 from INR 808 Mn in FY 2023-24, with the EBITDA margin expanding slightly to 13.1% from 13.0%. This improvement was driven by enhanced forging capacity, tighter cost controls, and favorable product mix in the trailer axle and suspension assembly segment. The successful commissioning of the 2,000-ton screw press during the year enabled higher forging throughput and supported increased axle output in the second half. In March 2025, the Company achieved its highest-ever monthly production of nearly 4,200 trailer axles.

Capacity utilization across key forging, machining, and assembly lines ranged between 67% and 85% during the year, contributing to improved operational efficiency. The Company also expanded its axle portfolio to cover 12 to 18-ton ranges and observed a higher share of air suspensions, aiding realizations and margin stability.

Profit after tax increased to INR 480 Mn in FY 2024-25, compared to INR 449 Mn in FY 2023-24, marking a 7.0% year-on-year growth. This was supported by stable operating margins, reduced finance costs post-IPO, and effective working capital management. As of March 31, 2025, the debt- to-equity ratio stood at 0.1x, reflecting improved financial strength and headroom to fund future growth.

While the axle beam extrusion plant and seamless tube manufacturing facility (Mill 219) did not contribute to FY 2024-25 revenue, both represent critical forward-looking investments. These initiatives are expected to reduce material costs, increase in-house value addition, and support entry into new product and export markets starting FY 2025-26.

SWOT ANALYSIS

Strengths

• With over three decades of operational history, Kross Limited has built deep expertise and trust in the automotive components sector, catering to leading OEMs and Tier 1 suppliers.

• The Company operates a backward-integrated manufacturing setup with in-house design, forging, casting, machining, and surface protection capabilities. This ensures better control over quality, cost, and lead times.

• Kross offers a comprehensive range of components across multiple vehicle categories and applications. Over time, the Company has successfully broadened its customer base, reducing dependence on a few large clients.

• The Company continues to maintain a disciplined financial profile, supported by healthy profitability metrics, low leverage, and a consistent focus on capital efficiency.

• Kross has long-standing relationships with prominent domestic and international OEMs and Tier 1 suppliers. The Company is recognized for its quality and reliability and has received multiple supplier awards.

Weakness

• The Companys growth roadmap includes multiple large-scale projects. Any delay or disruption in commissioning or stabilizing these facilities could impact targeted efficiencies.

• Although export volumes have begun to scale, the Companys revenue mix remains predominantly domestic, indicating scope for further international diversification.

• Business operations in certain segments have experienced extended receivable cycles and higher inventory holding, leading to increased pressure on operational cash flows.

Opportunities

• The commissioning of Indias first extrusion line is expected to enhance capacity, product quality, and margins, while enabling entry into new categories such as TAG axles.

• Strategic plans to introduce products such as tipping jacks will further deepen the Companys presence in the trailer ecosystem and open new revenue streams.

• The seamless tube manufacturing facility under development is expected to reduce dependency on external suppliers and unlock long-term margin benefits across product lines.

• The adoption of advanced manufacturing technologies positions Kross to tap into export opportunities in global trailer and axle markets, helping build a diversified international portfolio over time.

• Continued infrastructure development, regulatory changes, and OEM-led product upgrades are expected to support demand growth in the Companys core segments.

• The M&HCV segment is not under any immediate threat from electrification, either at present or in the near future, ensuring stability and visibility of demand.

Threats

• The Companys performance remains linked to the demand cycles in the commercial vehicle and trailer industries, which are susceptible to broader economic and regulatory developments.

• The automotive components industry is marked by pricing pressures, evolving customer expectations, and continuous technological advancement, necessitating ongoing agility and differentiation.

• The success of ongoing and future capacity expansion efforts will depend on timely execution, efficient ramp-up, and alignment with evolving market needs.

• While current export exposure is modest, shifts in international trade dynamics, tariffs, or regulatory frameworks could influence future growth trajectories.

FINANCIAL OVERVIEW

In FY 2024-25, Kross maintained steady revenue performance, supported by a strong recovery toward the end of the year following muted demand in the initial quarters. Profitability improved, driven by cost efficiencies, a more favorable product mix, and a higher share of export contributions. The application of IPO proceeds toward debt repayment led to lower finance costs and contributed to a stronger balance sheet. In parallel, improved asset utilization enhanced operational efficiency across the business.

Particulars	FY 2024-25	FY 2023-24
Revenue (INR Mn)	6,204	6,202.50
EBITDA (INR Mn)	812.50	807.50
EBITDA Margin (%)	13.10	13.02
PAT (INR Mn)	480.20	448.80
PAT (%)	7.70	7.22

Key Financial Ratios

Ratio	As of March 31, 2025	As of March 31, 2024	Variance (%)	Explanation in Case of Variance is More than 25%
Debtors Turnover Ratio	4.25	7.67	(44.59)	Better collection and realization.
Inventory Turnover Ratio	12.67	16.12	(21.40)	-
Interest Coverage Ratio	6.48	5.11	26.81	Significant portion of term loan repayment from IPO proceeds impacted the ratio.
Current Ratio	3.21	1.37	134.30	Improvement is due to repayment of borrowings from IPO proceeds.
Debt-to-Equity Ratio	0.12	0.95	(87.37)	Improvement is due to repayment of borrowings from IPO proceeds.
Operating Profit Margin (%)	11.99	12.09	(0.99)	-
Net profit Margin (%)	7.68	7.22	6.37	-
Return on Net Worth (%)	11.05%	30.57%	(63.85)	Fresh issuance of 1,04,16,666 equity shares in the initial public offering of the Company.

RISKS AND THEIR MITIGATION STRATEGIES

Risk	Impact	Mitigation Strategies
Competition-Related	Kross faces competition from both domestic and international players, some of whom possess greater resources and lower cost structures. This competitive landscape could exert pressure on pricing and margins, which in turn may impact the Companys market share, profitability, and overall growth trajectory.	The Company prioritizes product quality, continuous innovation, and long-term customer relationships, while actively investing in advanced technologies and process improvements to sustain its competitive edge.
End-User Industry-Related	A slowdown in vehicle sales, especially within the M&HCV and farm equipment sectors, could significantly reduce demand for Krosss offerings. Such a development may adversely affect both revenue generation and overall financial performance.	The Company actively monitors shifts in industry dynamics, while broadening both its product range and customer base. At the same time, Kross is aligning operations with emerging vehicle technologies and regulatory changes to reduce dependency on a single end-user segment.
Raw Material Price Volatility	If increases in steel and raw material prices cannot be fully passed on to customers, the resulting cost pressure may reduce Krosss margins, constrain working capital, and weaken its financial standing.	By engaging suppliers in strategic negotiations and establishing long-term agreements, the Company optimizes inventory management to control raw material cost volatility and alleviate working capital demands.
Customer Concentration	With a substantial portion of revenue from its top five customers, Kross remains vulnerable to supply chain or commercial disruptions if purchasing volumes from any of these accounts decline or stop altogether.	The Companys strategy focuses on reducing exposure by growing its customer base, securing critical relationships, integrating protective terms in key contracts, exploring untapped markets, and continuously evaluating the financial health of core clients.
Manufacturing Facility Disruption	Unplanned operational shutdowns or periods of under-utilization stemming from equipment malfunctions, regulatory hurdles, supply chain interruptions, or labor unrest can significantly disrupt business continuity, strain cash flows, and weaken financial performance.	The Company is taking a multi-pronged approach to mitigate operational risks by enforcing disciplined maintenance procedures, developing contingency plans, diversifying supplier networks, and investing in infrastructure enhancements.
Product Quality-Related	If Kross fails to uphold rigorous quality standards or fulfill warranty obligations, it may trigger product recalls and replacements, facilitating litigation, and suffering reputational harm, all of which could negatively impact its financial performance and operational stability.	To safeguard product integrity and meet customer-defined benchmarks, the Company has strengthened its operations with firm quality control, regular inspections, and thorough testing, thereby limiting exposure to defect- related issues.
Geographical Market Concentration	A concentrated focus on the Indian market heightens Krosss sensitivity to domestic economic, political, and sectoral fluctuations. Limited global reach continues to pose a challenge to broadening revenue sources across geographies.	To ease its reliance on the Indian market, the Company is broadening its global reach and developing the internal expertise required to manage the operational and regulatory challenges of international markets.