Is KRN Heat Exchanger IPO Good or Bad - Detailed Review

KRN Heat Exchanger and Refrigeration is kicking off its initial public offering which will be open from September 25, 2024 to September 27, 2024. While considering applying for this IPO, certain questions may arise in your mind, some of which include whether the KRN Heat Exchanger IPO is good or bad, whether it is worth investing in this IPO, and so on. 

In this article, we'll provide a comprehensive KRN Heat Exchanger IPO review, diving into its business operations and fundamental analysis to help you make a well-informed investment decision.

KRN Heat Exchanger and Refrigeration IPO - Company Overview

KRN Heat Exchanger and Refrigeration Ltd is a prominent manufacturer specializing in fin and tube-type heat exchangers. The company produces a variety of heat exchangers with copper and aluminum fins and copper tubes, including water coils, condenser coils, and evaporator coils. Their heat exchanger tubes come in a range of shapes and sizes, with diameters of 5 mm, 7 mm, 9.52 mm, 12.7 mm, and 15.88 mm. 

Its products are widely utilized across the domestic, commercial, and industrial sectors, particularly in the Heating, Ventilation, Air Conditioning, and Refrigeration (HVAC&R) industry. 

The company conducts all its manufacturing operations at a consolidated facility spread across two industrial plots located in the RIICO Industrial Area, Neemrana, Rajasthan. Additionally, to support business expansion and leverage forward integration opportunities, the company has established a wholly-owned subsidiary, KRN HVAC Products Private Limited, aimed at enhancing its portfolio with more value-added products.

KRN HVAC Products Private Limited will also focus on manufacturing certain types of heat exchangers that are currently not manufactured by the company. Through this forward integration, the company is planning to venture into the distribution and sales channels which will allow them to control the marketing and distribution of the complete product range of heat exchangers. This will enable KNR to capture a greater share of the value chain and establish direct connections with its end customers.

KRN Heat Exchanger IPO- Revenue Base

The company boasts a diverse customer base that spans various regions of India as well as international markets. Its esteemed clients, including Daikin Airconditioning India Private Limited, Schneider Electric IT Business India Private Limited, Kirloskar Chillers Private Limited, Blue Star Limited, Climaventa Climate Technologies Private Limited, and Frigel Intelligent Cooling Systems India Private Limited, reflect its dedication to providing high-quality products and exceptional services. 

Over the past three financial years, the company's revenue from operations has grown at a CAGR of 25.46%, with export sales rising significantly at a CAGR of 44.71%. The following tables gives you the details of the company’s domestic and export sales for the last three financial years.

Domestic sales

Export sales

Despite the revenue diversification from different locations, the company primarily generates its revenues from the top 10 of its customers. The details of sales made to the company’s top 1, top 5, and top 10 customers during the financial year ended on March 31, 2024, 2023, and 2022, details of which are as follows:

Let us now understand from which segment of the business the company generates its revenue. The table below shows you the company's product-wise revenue during the last three financial years:

KRN Heat Exchanger IPO - Financial Overview

The following table shows you the key financial details of KRN Heat Exchanger and Refrigeration for three financial years:

If we take a look at the financials of KRN Heat Exchanger and Refrigeration, we can see that the company has increased its revenue, from Rs.156.11 crores in FY22 to Rs.308.28 cr in FY24. However, the growth rate of the company’s revenue has declined to 24.57% in FY24 compared to the previous financial years.

Similarly, its profits have increased from Rs.10.59 cr in FY22 to Rs.39.07 cr in FY24 retaining a profit margin of 12.67%.

 For FY24, the ROE and RoCE were reported at 40.86% and 31.21%, respectively. This suggests that the company has given exceptional returns to the shareholder's capital and has efficiently utilized its overall resources. 

Furthermore, the debt-equity ratio of the company during FY24 reduced to 0.45 which suggests that the company majorly uses its own funds to run its business. Moreover, the company has a Debt service coverage ratio of 8.64 as of FY24 indicating the company’s ability to pay its debt obligations 8 times.

However, the inventory turnover days of the company have increased from 38 days to 112 days in the past three years, indicating that the company is taking a longer duration to convert its inventory to sales. This can lead to a working capital crunch in the company which is evident through its short-term borrowings that have increased from Rs.11 cr to Rs.46 cr in the past three years.

KRN Heat Exchanger IPO - Industry Overview 

Heat exchangers facilitate the transfer of thermal energy between two fluids without allowing them to mix. This process, driven by conduction, allows the heat exchanger to either heat or cool a substance. By regulating temperatures, heat exchangers enhance efficiency, prevent overheating, and mitigate various risks, ultimately improving safety standards.

As an energy-saving solution, heat exchangers are widely used in domestic and industrial applications such as steam power plants, chemical processing, food processing, HVAC systems, mining, pulp and paper, and metallurgy.

In 2023, the global heat exchanger market is valued at USD 16.8 billion, with a strong CAGR of 6.4% from 2019 to 2023. Meanwhile, the Indian heat exchanger market reached USD 689 million in 2023, with a turnover growing at a CAGR of 10% during the same period. This growth is largely fueled by the rising demand for sustainable, low-energy, and cost-effective solutions worldwide.

KRN Heat Exchanger IPO - Peer Comparison

The company operates in a highly competitive HVAC industry, contending with both international players and established domestic companies, such as Prijai Heat Exchangers, Spirotech Heat Exchangers, Alfa Laval India, and others. According to the "Industry Assessment: Indian Heat Exchanger Industry" report from August 2024, this intense competition presents significant risks to the company's operations and financial performance.

Key competitive factors in the industry include product quality, technical expertise, client relationships, and timely delivery. Additionally, the company faces challenges from competitors who may have larger financial and technical resources, enabling them to better withstand market fluctuations, compete on price, and adapt to customer preferences or new technologies more quickly. This competition could lead to reduced sales, lower profit margins, and diminished market share.

KRN Heat Exchanger and Refrigeration IPO Details

KRN Heat Exchanger IPO Date

KRN Heat Exchanger and Refrigeration IPO is open to subscription from September 25, 2024, to September 27, 2024. The shares will be allocated to investors on September 30, 2024, and the company will be listed in the NSE and BSE on October 3, 2024

KRN Heat Exchanger IPO Issue Price

KRN Heat Exchanger and Refrigeration is offering its shares in the price band of Rs.209 to Rs.220 apiece. This means you would require an investment of Rs.14,300 per lot (65 shares) if you are bidding for the IPO at the upper price band.

KRN Heat Exchanger IPO Size

The company is offering a total of 15,543,000 shares, amounting to Rs.341.95 cr which will be completely through a fresh issue. 

KRN Heat Exchanger IPO GMP

Many investors look at the Grey Market Premium (GMP) before applying for the IPO. The GMP gives an idea of market sentiment and can hint at the possible listing price. However, it should be noted that it does not reflect how financially strong a company is. Thus, it is important to financially analyze the stock before investing in it.

KRN Heat Exchanger Application Link

Open a free Demat account with Rupeezy today and enjoy a seamless experience when applying for the IPO. With an easy-to-use platform, Rupeezy makes the IPO application process quick and hassle-free. Click on the apply link below to get started.

Apply for KRN Heat Exchanger IPO

Is KRN Heat Exchanger IPO a Good or Bad? Final Thoughts

KRN Heat Exchanger IPO Review: The KRN Heat Exchanger and Refrigeration IPO presents both opportunities and risks for potential investors. With the company's revenue growing steadily, the company demonstrates solid financial performance. Notably, the company has reduced its debt levels, suggesting efficient use of its own capital.

However, increasing inventory turnover days and rising short-term borrowings could pose challenges, hinting at possible cash flow issues. Additionally, the company operates in a highly competitive HVAC industry, which may impact future growth prospects. Investors should carefully evaluate the company's fundamentals, competitive position, and market conditions before making an investment decision.

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