KRN Heat Exchanger and Refrigeration Limited IPO: Check IPO Date, Lot Size, Price & Details

About the company:

KRN Heat Exchanger and Refrigeration Ltd is a prominent manufacturer specializing in fin and tube-type heat exchangers. The company produces copper and aluminum fin heat exchangers, as well as copper tube heat exchangers, including water coils, condenser coils, and evaporator coils. Their product range covers heat exchanger tubes in various sizes, from 5 mm to 15.88 mm in diameter. These products are widely used across the domestic, commercial, and industrial sectors, particularly in Heating, Ventilation, Air Conditioning, and Refrigeration (HVAC&R) systems. KRN Heat Exchanger’s esteemed clients include Daikin Airconditioning India Pvt Ltd, Schneider Electric IT Business India Pvt Ltd, Kirloskar Chillers Pvt Ltd, Blue Star Ltd, Climaventa Climate Technologies Pvt Ltd, and Frigel Intelligent Cooling Systems India Pvt Ltd. The company also exports to countries such as the UAE, USA, Italy, Saudi Arabia, Norway, the UK, and others. Its advanced manufacturing facility, spanning 7,800 sq. meters in Neemrana, Rajasthan, is equipped with state-of-the-art machinery like Hair Pin Benders, Fin Press Machines, CNC Tube Benders, and Vertical Expanders.

IPO Details:

The objectives of the fresh issue:

The company intends to utilize the net proceeds from the fresh issue towards funding the following objects:

• Invest in the wholly owned subsidiary, KRN HVAC Products Pvt Ltd for setting up a new manufacturing facility at Neemrana, Alwar, Rajasthan, and
• General corporate purposes.

Key Strengths and Opportunities:

• The company served 112 customers during the financial year 2022-23, with its top 10 clients accounting for nearly 76% of revenue. It sold products in 17 states across India and exported to 9 countries. Due to its reliance on a small group of customers, the company is focusing on expanding its market presence and customer network. This strategy aims to reduce dependency and mitigate risks while exploring new markets. To meet the growing demand from existing clients, the company plans to enhance product distribution. By expanding into new regions and diversifying its product range, the company aims to capitalize on increasing demand for heat exchangers and seize growth opportunities.
• The company emphasizes that providing quality products at competitive prices is crucial for sustaining and growing its operations. To achieve this, it has implemented various initiatives aimed at enhancing cost efficiency and considers this a core business strategy. Over the past three financial years, the company has reportedly improved its operational efficiencies, which has positively impacted its financial performance. It plans to further enhance these efficiencies by adopting diverse manufacturing and sourcing strategies, as well as cost-reduction techniques. For instance, the company is focused on optimizing manpower and continually seeks ways to lower costs, including the application of value analysis methods to its products.
• The company aims to diversify its customer base and increase market share by boosting sales in existing markets and expanding into new regions. Over the years, it has successfully grown its customer network across Europe, which remains a key part of its future strategy. With a broader product portfolio and a solid brand reputation, the company believes it can attract new customers more effectively. It plans to concentrate on key regions such as North America and Europe, establishing a stronger local presence and building connections to capitalize on growth opportunities. The company will prioritize acquiring new clients, retaining existing ones, and delivering high-quality products to support this growth strategy.

Risks:

• The company is significantly reliant on its customer base, with 33.34%, 32.85%, and 32.28% of its revenue in the financial years 2024, 2023, and 2022, respectively, coming from Daikin Airconditioning India Private Limited. Furthermore, its top 10 customers account for 72.31%, 70.87%, and 75.82% of revenue for the same years. Consequently, any delays or cancellations of orders from these key clients could negatively impact the company’s business operations and financial health. This heavy dependence on a few customers presents a substantial risk to the company.
• The company relies significantly on suppliers from Malaysia, South Korea, Thailand, Vietnam, and China for its raw materials, with import purchases constituting 78.17%, 79.08%, and 72.16% of total raw material acquisitions in the financial years 2024, 2023, and 2022, respectively. This heavy reliance on imports exposes the company to potential risks associated with specific countries or changes in government policies regarding imports. Any shifts in trade regulations or geopolitical tensions could disrupt the sourcing of raw materials, potentially harming the company’s operations and overall financial health. As a result, diversifying supply sources may be essential to mitigate these risks.
• The company’s inventory holdings amounted to Rs. 8,440.52 million, Rs. 5,508.43 million, and Rs. 2,130.85 million for the financial years ending March 31, 2024, 2023, and 2022, respectively, representing 37.02%, 29.99%, and 16.42% of the Cost of Goods Sold. This steady increase in inventory levels has resulted in suboptimal resource utilization. If the company does not effectively manage its inventory and accurately forecast demand, it risks negatively impacting its business operations and financial stability. Consequently, improving inventory management practices and demand forecasting will be critical to maintaining operational efficiency and financial health.

Financial Snapshot: