Kenrik Industries SME IPO Analysis: Should You Apply? -

Table of Contents

Introduction

Kenrik Industries, based in Ahmedabad, is set to launch its SME IPO on April 29, 2025, aiming to raise ₹8.75 crore at ₹25 per share. The IPO will remain open until May 6, 2025, and is scheduled to list on May 9, 2025, on the BSE SME platform. Specializing in designing and distributing traditional Indian jewellery, the company operates in a competitive market. This comprehensive analysis explores the financial performance, risk factors, management details, and provides an investment recommendation for the Kenrik Industries IPO.

Financial Performance

Kenrik Industries has demonstrated revenue growth over recent years, with figures rising from ₹32.69 crore in FY22 to ₹70.97 crore in FY24, and ₹42.19 crore for the period ending October 2024. Profit after tax (PAT) has also increased, from ₹0.39 crore in FY22 to ₹1.08 crore in FY24, and ₹0.78 crore by October 2024. However, the PAT margin remains low at 1.53%, indicating limited profitability relative to revenue. The price-to-earnings (P/E) ratio stands at 20.74 pre-IPO and 23.31 post-IPO, which appears high given the modest earnings. Other metrics include a return on equity (ROE) of 9.01%, return on capital employed (ROCE) of 10.85%, and a low debt-to-equity ratio of 0.06, suggesting minimal debt reliance.

The following table summarizes key financial and operational data:

Category	Details
Financials	– Revenue FY22: ₹32.69 Cr, FY23: ₹52.04 Cr, FY24: ₹70.97 Cr, Oct 2024: ₹42.19 Cr – PAT FY22: ₹0.39 Cr, FY23: ₹0.47 Cr, FY24: ₹1.08 Cr, Oct 2024: ₹0.78 Cr – ROE: 9.01%, ROCE: 10.85%, PAT Margin: 1.53%, Debt/Equity: 0.06, EPS: ₹1.21 (pre-IPO), ₹1.07 (post-IPO), P/E: 20.74 (pre-IPO), 23.31 (post-IPO), Market Cap: ₹31.24 Cr
Risk Factors	– High competition in jewellery sector – Reliance on third parties for job work – Sudden FY24 profit boost raises sustainability concerns – Labeled “High Risk/Low Return” by reviews
Use of Proceeds	– Working Capital: ₹65.63 million – General Corporate Expenses: ₹18 million – Total: ₹8.75 Cr (fresh issue)
Management	– Promoters: Nitinkumar Dalpatbhai Shah, Nihar Nitinbhai Shah, Manisha Nitinkumar Shah, Shah Nitin Dalpatlal (HUF) – Pre-IPO holding: 99.996%, Post-IPO: 72.01% – Employees: 9 (July 31, 2024)
Subscription Status	– Open: April 29 to May 6, 2025 – Listing: May 9, 2025 – Retail: 50%, NII: 50%, QIB: 0% – Minimum Lot: 6000 shares (₹1,50,000), HNI: 12,000 shares (₹3,00,000)
Peer Comparison	– Veerkrupa: EPS ₹0.31, P/E 4.06, RoNW 1.83% – Motisons: EPS ₹4.3, P/E 38.68, RoNW 9.82% – Khazanchi: EPS ₹11.01, P/E 28.15, RoNW 14.55%

Risk Factors

Investors should be aware of several risks associated with the Kenrik Industries IPO:

High Competition: The jewellery sector is highly competitive, with established players dominating market share.
Reliance on Third Parties: The company depends heavily on third-party job work, which could impact quality and delivery timelines.
Profit Sustainability: A sudden profit increase in FY24 raises concerns about whether these gains are sustainable.
High Risk/Low Return: Reviews, such as those on Chittorgarh, label the IPO as “High Risk/Low Return,” advising caution.

Use of Proceeds

The ₹8.75 crore raised from the IPO will be allocated as follows:

Working Capital: ₹65.63 million to support operational needs.
General Corporate Expenses: ₹18 million for miscellaneous business purposes.
Total: ₹8.75 crore, entirely from fresh issue shares.

Management

The company is led by promoters Nitinkumar Dalpatbhai Shah, Nihar Nitinbhai Shah, Manisha Nitinkumar Shah, and Shah Nitin Dalpatlal (HUF). They currently hold 99.996% of the shares, which will dilute to 72.01% post-IPO. As of July 31, 2024, Kenrik Industries employs 9 staff members, indicating a lean operational structure.

Subscription Status

The IPO is structured with:

Dates: Open from April 29 to May 6, 2025, with listing on May 9, 2025.
Allocation: 50% for retail investors, 50% for non-institutional investors (NII), and no allocation for qualified institutional buyers (QIB).
Lot Size: Retail investors must apply for a minimum of 6,000 shares (₹1,50,000), while high-net-worth individuals (HNIs) require 12,000 shares (₹3,00,000).

This high minimum investment may limit participation, particularly for retail investors, as noted in Business Standard.

Peer Comparison

To contextualize Kenrik Industries’ valuation, consider its peers:

Veerkrupa: EPS ₹0.31, P/E 4.06, RoNW 1.83%
Motisons: EPS ₹4.3, P/E 38.68, RoNW 9.82%
Khazanchi: EPS ₹11.01, P/E 28.15, RoNW 14.55%

Kenrik’s P/E ratio (20.74–23.31) is moderate compared to Motisons and Khazanchi but significantly higher than Veerkrupa, suggesting a relatively expensive valuation for its earnings.

Investment Recommendation

Given the low profit margins (1.53%), high P/E ratio (20.74–23.31), and significant risks, it seems prudent not to apply for the Kenrik Industries SME IPO. The high minimum investment of ₹1,50,000 for retail investors further increases the risk, particularly in light of the “High Risk/Low Return” label from industry reviews. Investors seeking SME IPO opportunities may find better alternatives with stronger fundamentals and lower risk profiles.

Conclusion

While Kenrik Industries has shown revenue growth, its low profitability, high valuation, and operational risks make it a less attractive investment. The competitive jewellery market, reliance on third parties, and concerns about profit sustainability add to the challenges. Coupled with a high minimum investment and cautionary reviews, the IPO does not appear to offer compelling value for retail or institutional investors. Careful consideration of these factors is essential before deciding to participate in the Kenrik Industries IPO.

Key Citations

📢 Disclaimer

This blog is for educational purposes only and is not a stock recommendation. Always consult your financial advisor and conduct your own research before making any investment decisions.