KRN Heat Exchanger and Refrigeration Limited Company is coming up with an IPO size of Rs. 341.95 crore. The company is going for all shares of the fresh issues of Rs. 341.95 crore, which will open on 25th September 2024. The issue will close on 27th September 2024 and be listed on the exchange on 03rd October 2024. In this article, we will look at the KRN Heat Exchanger and Refrigeration Limited IPO Review and analyze its strengths and weaknesses. Let’s begin!

KRN Heat Exchanger and Refrigeration IPO – About the Company

KRN Heat Exchanger and Refrigeration Limited is a well-known manufacturer of fin and tube-type heat exchangers used in the HVAC and refrigeration industries. The company produces a wide range of products, including copper and aluminum fins, copper tubes, water coils, condenser coils, and evaporator coils, catering to domestic, commercial, and industrial applications. It produces heat exchanger tubes with diameters ranging from 5 mm to 7 mm, 9.52 mm, 12.7 mm, and 15.88 mm.

KRN Heat Exchanger and Refrigeration Limited has a state-of-the-art manufacturing facility in Neemrana, Rajasthan, over an aggregated area of 7,800 sq. meters. The company leverages advanced machines and technologies to deliver customized solutions that meet international quality standards. The company has established a strong presence in both domestic and international markets, exporting to countries such as the UAE, USA, Italy, Saudi Arabia, Norway, Czech Republic, UK, and Germany.

KRN Heat Exchanger and Refrigeration Limited serves prestigious customers including Daikin India, Schneider Electric, Voltas, Carrier, Eberspaecher, Kirloskar, Blue Box, and Knorr Bremse. With a projected export revenue of $8.75 million and domestic sales of $26.25 million for the 2023-24 fiscal year, KRN continues to solidify its position as a leading player in the heat exchanger manufacturing sector, serving diverse applications in the heating, ventilation, air conditioning, and refrigeration industries.

Industry Overview

The Indian heat exchanger industry has experienced robust growth, reaching USD 689 million in 2023 from USD 625 million in 2022, which has grown at a 10% CAGR from 2019 to 2023. Despite a slowdown in 2020 due to the pandemic, the sector rebounded strongly, averaging 11% annual growth from 2021 to 2023.

This expansion is driven by rapid industrialization, urbanization, and infrastructure development. The industry’s diverse applications across major sectors, particularly in chemical manufacturing (21.4%), oil & gas(20%), power and energy (15.4%), HVAC (14.9%), metal (8.2%), and others (20.1%), ensure sustained demand and growth potential.

The global heat exchanger industry has grown at a CAGR of 6.4% from FY19 to FY23, which is reached to USD 16.8 billion in 2023. Below, images show the geographical pattern of the global heat exchanger market. 

Finned tube heat exchangers are the second largest product segment in the Indian heat exchanger market, accounting for nearly one-fifth of total industry revenue. Finned tube heat exchangers have increased from USD 133 million in 2022 to USD 146 million in 2023. This industry has grown at a CAGR of nearly 10.7% between the periods of 2020 and 2023.

The increasing demand for energy-efficient cooling applications factors in the growth of finned tube heat exchangers. Below, the images show the Indian finned tube heat exchanger market from 2019 to 2023.

KRN Heat Exchanger and Refrigeration IPO – Financial Highlights

Coming into the financial analysis of KRN Heat Exchanger and Refrigeration Limited, the company’s revenue has increased from ₹247.48 crores in FY23 to ₹308.28 crores in FY24, which has grown by 24.57% as compared to the previous year. KRN Heat Exchanger and Refrigeration Limited’s revenue growth has had a compound annual growth rate(CAGR) of 40.51% over the last two years.

KRN Heat Exchanger and Refrigeration Limited has earned revenue from evaporator coils (37.49%), condenser coils (55.24%), headers/copper parts (1.52%), sheet metal parts (0.05%), and other operating revenue (5.71%). The company has made revenue mainly from India by 85.32%, Europe by 2.57%, North America by 3.46%, and Asia except India by 8.66% in FY24.

KRN Heat Exchanger and Refrigeration Limited’s net profit has massively increased from ₹10.59 crore in FY22 to ₹32.31 crore in FY23, which has grown by 205.1%. The company’s net profit improved in FY24 and reached ₹39.07 crore, which has grown by 20.92%. The net profit has grown at a CAGR of 88.29% over the last two years. 

KRN Heat Exchanger and Refrigeration Limited’s EBITDA margin has decreased from 19.83% in FY23 to 18.96% in FY24. The PAT margin has also dropped from 13.06% in FY23 to 12.67% in FY24.

In FY24, KRN Heat Exchanger and Refrigeration Limited’s ROE dropped from 75.94% to 40.86%. The ROCE of the company also dropped from 50.46% in FY23 to 31.21% in FY24. Further, KRN Heat Exchanger and Refrigeration Limited has decreased its debt-to-equity ratio from 0.62x in FY23 to 0.45x in FY24.

Note: The FY24 numbers presented by the company are in a consolidated basis whereas the previous years i.e., FY23 and FY22 are on standalone basis.

Peers of the Company

KRN Heat Exchanger and Refrigeration Limited has no peer companies listed in the Indian stock market as mentioned in the KRN Heat Exchanger and Refrigeration Limited RHP.

Strengths of the Company

• Strategic Customer Relationships: The company has built strong relationships with major Original Equipment Manufacturers (OEMs) like Daikin, which significantly contributes to revenue. This partnership enhances the company’s credibility and potential for expanding into new markets.
• Export Market Growth: The company has been expanding its international footprint, with 14.68% of revenue generated from exports in FY 2024. This focus on overseas markets provides diversification and growth opportunities outside of India.
• In-House Manufacturing and Testing: A well-equipped manufacturing facility allows the company to control quality and reduce costs, offering a competitive edge in new and existing markets.
• Technological Advancements: Continuous investments in advanced machinery and testing equipment have strengthened its in-house manufacturing capabilities, which allow for rapid scaling and product diversification, supporting further business growth.
• Manufacturing Expansion: With the establishment of a new subsidiary, KRN HVAC Products, in 2023, the company broadened its product portfolio, particularly for high-value products like bar and plate heat exchangers. KRN’s advanced manufacturing units in Neemrana, Rajasthan support higher production efficiency and superior product quality.
• Expanding Global Footprint: With exports growing significantly across Asia and North America, KRN is strategically focusing on international markets to drive future revenue.

Weaknesses of the Company

• Dependence on a Limited Customer Base: Although relationships with key customers like Daikin are strong, 60–70% of revenue comes from just the top 10 clients. This concentration increases risk if one or more clients reduce their business.
• Heavy Competition: The heat exchanger market is highly competitive, with major international players like Alfa Laval and Danfoss exerting price pressures, which could squeeze margins.
• Capital-Intensive Expansion: The company’s ongoing expansion efforts are capital-intensive, which increases the financial burden, especially when relying on debt financing. This can limit the flexibility to pursue further expansion opportunities.
• Geopolitical and Market Risks: As the company expands internationally, especially in Europe and the APAC region, it faces increased exposure to geopolitical risks and currency fluctuations, which could affect profitability.
• Raw Material Price Fluctuations: The company’s reliance on non-ferrous metals like copper and aluminum makes it vulnerable to volatile raw material prices, affecting profitability.
• Limited Brand Recognition: While KRN has strong client relations, it lacks broad brand recognition compared to larger global competitors, which could hinder growth in new markets.

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KRN Heat Exchanger and Refrigeration – Key IPO Information

The shares of KRN Heat Exchanger and Refrigeration Limited’s price in the grey market were trading at a 101.36% premium as of September 23rd, 2024. The shares in Grey Market traded at Rs 443. This gives it a premium of Rs. 223 per share over the cap price of Rs. 220.

Promoters: Mr. Santosh Kumar Yadav, Mrs. Anju Devi, and Mr. Manohar Lal.

Book Running Lead Manager: Holani Consultants Private Limited

Registrar to the Offer: Bigshare Services Private Limited

The Objective Of The Issue:

• ₹242.46 crore in equity investment in the wholly-owned subsidiary KRN HVAC Products Private Limited for the establishment of a new manufacturing facility in Neemrana, Alwar, Rajasthan.
• General corporate purposes

Conclusion

In conclusion, KRN Heat Exchanger and Refrigeration Limited stands out as a promising player in the thriving heating, ventilation, air conditioning, and refrigeration (HVAC&R) industry. The company’s expertise in fin and tube-type heat exchangers positions it well for growth. KRN’s global reach and strong client relationships create a solid foundation for expansion. Its focus on technological advancement enhances its competitive edge. The company’s strategic investments in manufacturing capabilities show foresight. 

KRN Heat Exchanger and Refrigeration Limited’s IPO offers investors a unique opportunity to participate in the dynamic heat exchanger market. With its innovative approach and expanding product portfolio, KRN is poised for success. Overall, the KRN Heat Exchanger and Refrigeration presents an exciting prospect for looking to invest in industrial innovation.

So what do you think about KRN Heat Exchanger and Refrigeration Limited? What is your view? Let us know in the comments below.

Written By Nikhil Naik

By utilizing the stock screener, stock heatmap, portfolio backtesting, and stock compare tool on the Trade Brains portal, investors gain access to comprehensive tools that enable them to identify the best stocks, also get updated with stock market news, and make well-informed investments.

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