KRN Heat Exchanger, a prominent player in the Heat Ventilation Air Conditioning & Refrigeration (HVAC&R) sector, is gearing up for its Initial Public Offering (IPO). With a reputation for manufacturing high-quality, non-ferrous heat exchangers, the company’s upcoming public listing has already garnered attention from investors. In KRN Heat Exchanger IPO Review, we cover 10 points every investor should know.
#1 KRN Heat Product Portfolio: Comprehensive Heat Exchanger Solutions
KRN Heat Exchanger specializes in manufacturing fin and tube-type heat exchangers made primarily from copper and aluminum. Its product portfolio includes evaporator coils, condenser coils, fluid and steam coils, condensing units, copper headers parts, and sheet metal parts. The diameter of its heat exchanger tubes ranges from 5 MM to 15.88 MM. This wide array of products is tailored to meet the specific requirements of industries such as air conditioning, heating, and refrigeration. The ability to manufacture custom-sized heat exchangers further enhances KRN’s product differentiation, positioning it strongly in the market.
#2 KRN Heat Exchanger IPO Review: Offer Details
KRN Heat Exchanger IPO is scheduled for 25 to 27 September 2024, with a price range of INR 209 to 220 per share, and shares are scheduled to make a debut on the BSE, and NSE on Thursday, 3 October 2024. The IPO is purely a fresh issue of 1,55,23,000 shares, valuing the offering between INR 324.43 – 341.51 crores. The minimum bid size is 65 shares, priced at INR 14,300, and retail investors are to be allotted 35% of the shares.
#3 KRN Heat Exchanger IPO Review: Financial Performance and Growth Trajectory
KRN Heat Exchanger has demonstrated impressive growth in recent years. According to the company’s Consolidated Restated Financial Information, revenue grew at a CAGR of 25.46% over the past three financial years, a figure that stands out in a competitive market.
These financial figures underline the company’s consistent performance and provide a solid foundation for its IPO valuation.
| Â | FY 2022* | FY 2023* | FY 2024 |
| Revenue | 156.11 | 247.48 | 308.28 |
| Expenses | 143.26 | 204.39 | 257.81 |
| Net income | 10.59 | 32.32 | 39.03 |
| Margin (%) | 6.78 | 13.06 | 12.66 |
* Standalone Data
#4 KRN Heat Exchanger IPO Review: Strong Export Growth
In recent years, the company has focused its efforts on export markets and has participated in global HVAC industry exhibitions and events. These efforts have yielded positive results and the company’s international customer base has increased from 10 customers in FY 2022 to 32 customers in FY 2024. Meanwhile, export revenues increased significantly from INR 14.94 crore in FY 2022 to INR 45.27 crore in FY 2024, growing at a CAGR of 44.71% over the last three years.
Export sales, with their high-volume orders and higher profit margins compared to domestic sales, have significantly bolstered KRN Heat Exchanger’s financial performance. The UAE, the USA, and Europe are the prominent export destinations for the company.
#5 KRN Heat Exchanger IPO Review: Expanding Market Reach
To broaden its market reach and expand its product portfolio, KRN plans to set up a new manufacturing facility at Neemrana, Alwar for manufacturing bar and plate heat exchanger, oil cooling with blower, motor and roll band evaporator. The investment in forward integration is aimed at addressing the growing needs of railways for their electric engines, compressors manufacturers and refrigerator manufacturing companies.
#6 KRN Heat Exchanger IPO Analysis: Capacity Expansion
Majority of the IPO proceeds (INR 242.5 crore) are earmarked to further expand KRN’s production capabilities and enhance its working capital. Specifically, the funds will help scale the operations of KRN HVAC Products Private Limited, allowing the company to manufacture and distribute a broader range of high-value products. The new facility at Neemrana is said to expand the company’s production capacity by six times and also facilitate its entry in new products and industries.
#7 KRN Heat Exchanger IPO Review: Valuation
| FY 2022 | FY 2023 | FY 2024 | |
| EPS | 2.27 | 6.94 | 6.29 |
| PE Ratio | – | – | 33.25 – 35.00 |
| RONW (%) | 41.48 | 54.24 | 29.68 |
| NAV | 5.48 | 12.78 | 28.25 |
| ROCE (%) | 34.65 | 50.46 | 31.21 |
| EBITDA (%) | 10.85 | 19.93 | 18.96 |
| Debt/Equity | 0.87 | 0.62 | 0.45 |
#8 KRN Heat Exchanger IPO Analysis: Experienced Leadership with a Strong Track Record
The company is helmed by Mr. Santosh Kumar Yadav, an industry veteran with over 19 years of experience in manufacturing heat exchangers. With leadership stints at Lloyd Electric & Engineering Limited and international exposure at the Luvata Czech Plant, Mr. SK Yadav has honed his skills in operations, strategic planning, and technical processes. His strong leadership has been pivotal in scaling KRN’s operations and steering the company toward new product lines and markets.
#9 KRN Heat Exchanger IPO Analysis: Long-Standing Relationships with Major Clients
KRN Heat Exchanger boasts a diverse and prestigious client base, which includes industry giants such as Daikin Airconditioning, Schneider Electric, Blue Star, Climaventa Climate Technologies, Frigel Intelligent Cooling Systems, and Kirloskar Chillers. These long-term relationships demonstrate the trust that major HVAC&R players place in KRN’s products. Repeat business from such high-profile clients not only provides a stable revenue stream but also attests to the company’s reputation for delivering high-quality, reliable products. In the Financial Year ended 31 March 2024, the company had a supplier base of over 510 suppliers, diversified across geographies.
#10 KRN Heat Exchanger IPO Review: Risk Factors
- Daikin Air Conditioning India Private Limited is the biggest customer of the company and accounted for 33.34% of revenues in FY 2024. Any decline in demand from this customer could negatively impact KRN’s business.
- The company also depends significantly on vendors from Malaysia, South Korea, Thailand, Vietnam, and China. Any country-specific risks or changes in government policies regarding the import of goods could pose a threat to the business.
- The company does not have long-term contracts with its suppliers, increasing its vulnerability.
- If the top 10 customers in the refrigeration and air conditioning (RAC) industry begin producing heat exchangers in-house, or if the industry experiences a downturn, the company’s sales could be adversely impacted.
KRN Heat Exchanger IPO Analysis: Conclusion
KRN Heat Exchanger IPO represents a unique investment opportunity in a company with a strong track record, robust financial performance, and significant growth potential. Investors looking for exposure to the rapidly growing HVAC&R sector and a company with a strong foothold in both domestic and international markets may find KRN Heat Exchanger an appealing option. There is also a strong premium in grey market on KRN Heat Exchanger IPO.
