The initial public offering (IPO) of KRN Heat Exchanger and Refrigeration opens for bidding on Wednesday, September 25. The company is offering its shares in the fixed price band of Rs 209-220 apiece, where investors can apply for a minimum of 65 equity shares and its multiples thereafter. The issue shall close for bidding on Friday, September 27.
KRN Heat Exchanger and Refrigeration is a manufacturer of fin and tube-type heat exchangers, offering copper and aluminium fins and copper tubes, heat exchangers, water coils, condenser coils, and evaporator coils. All the products offered are used in the domestic, commercial, and industrial heating, ventilation, air conditioning and refrigeration industry.
The Rs 341.95 IPO of KRN Heat Exchanger is entirely a fresh sale of 1,55,23,000 equity shares. The net proceeds from the issue shall be utilized towards investing in the wholly owned subsidiary, KRN HVAC Products for setting up a new manufacturing facility and general corporate purposes.
KRN Heat Exchanger and Refrigeration has raised Rs 100.1 crore from 10 anchor investors by allocating 45.5 lakh shares at Rs 220 apiece including Holani Venture Capital Fund, Mint Focused Growth Fund, Whiteoak Capital, Bandhan Smallcap Fund, VQ Fastercap Fund, Ashoka India Equity Investment Trust, Saint Capital Fund, Kotak Iconic Fund, and Ashoka Whiteoak Emerging Markets Trust.
KRN Heat's manufacturing facility is situated in Neemrana, Rajasthan over an aggregated area of 7,800 sq. mt. It uses the coil manufacturing machines including Hair Pin Bender, Fin Press Machine, CNC Tube Bender, and Vertical Expander. It manufactures heat exchanger tubes of different shapes and sizes from 5 mm diameter to 7 mm, 9.52 mm, 12.7 mm, and 15.88 mm.
Its client book includes names like Daikin Airconditioning India, Schneider Electric IT Business India, Kirloskar Chillers, Blue Star, Climaventa Climate Technologies and Frigel Intelligent Cooling Systems India. The company also exports products overseas to countries including UAE, USA, Italy, Saudi Arabia, Norway, Czech Republic, Germany, UK, and more.
KRN Heat Exchanger reported a net profit of Rs 39.07 crore with a revenue of Rs 313.54 crore for the financial year ended on March 31, 2024. The company's bottomline came in at Rs 32.31 crore with revenue of Rs 249.89 crore for the fiscal year 2022-23.
The company raised about 9.54 crore through its pre-IPO placement by selling 4.77 lakh shares for Rs 200 apiece. It has reserved 50 per cent of the net offer for qualified institutional bidders (QIBs) and 35 per cent for the retail investors. Remaining 15 per cent shares all be allocated towards non-institutional investors (NIIs).
Holani Consultants is the sole book running lead manager of the KRN Heat Exchanger IPO, while Bigshare Services is the registrar for the issue. Shares of the company shall be listed on both BSE and NSE, with Thursday, October 3 as the tentative date of listing on the bourses. Here's what brokerage firms say about the IPO of KRN Heat Exchanger and Refrigeration:
SBI Securities Rating: Subscribe for long term At the upper price band of Rs 220, KRN Heat Exchanger is valued at FY24 P/E multiple of 35 times based on its post issue capital. The issue appears attractive given the healthy growth track record of the company. KRN’s revenue, Ebitda and PAT has grown at a CAGR of 40.5 per cent, 86.1 per cent and 92.1 per cent respectively over FY22-24, said SBI Securities.
"The IPO proceeds will be utilized by the company to fund for establishing a new manufacturing unit in Rajasthan which will help expand its product portfolio and distribution channel. We recommend subscribing to the issue for a long term investment horizon," it said.
Reliance Securities Rating: Subscribe KRN Health has established itself as one of the top players in fin and tube-type heat exchangers for the HVAC&R industry using non-ferrous metals like copper and aluminum. KRN is known for quality and innovation partners with leading industry players and strategically expanding its global reach and enhancing operational efficiency, said Reliance Securities.
"Being an first generation entrepreneur with over 19 years of experience in manufacturing heat exchangers and refrigeration units has moved KRN from a single product to multi product company with long-standing business relationships with leading clientele and multi fold expansion in revenues, offers strong growth going ahead with consistent profitability," it said with a 'subscribe' tag.
Arihant Capital Markets Rating: Subscribe for long term KRN Heat Exchanger aims to capitalize on its diverse product portfolio coupled with efforts to ensure forward integration and a new manufacturing facility with IPO proceeds to penetrate international markets and increase its market presence. The company has prestigious clients like Daikin, Bluestar and Schneider among others, said Arihant Capital Markets.
"Its revenue grew at a CAGR of 25 per cent for the past three years. Given the strong tailwind the Air conditioners, EMS players are seeing, KHERL is well positioned. The issue is priced at a P/E of 33.5 times post issue based on the FY24 post issue EPS of Rs 6.29. We are recommending 'subscribe for the long term' for this issue," it added.
Swastika Investmart Rating: Subscribe for listing gains KRN Heat Exchanger is the industry leader with international quality standards. The company has a quick turnaround time. Strong relationship with leading clients. The company has reported a steady growth in both revenue and profitability, said Swastika Investmart.
"The IPO's valuation is considered fair, although there is no listed peer for comparison. Given its strong fundamentals and potential for listing gains, investors may consider subscribing to this IPO for listing gain as well as for long term," it added.
Indsec Research Rating: Subscribe The IPO of KRN Heat is attractively priced at a PE of 35 times on FY24 basis. There is no listed peer for the company. Multiple growth opportunities lie ahead for the company on account of low penetration of RAC in Indian households, rising demand for energy, export opportunity and ramping up of manufacturing capacity, said Indsec Research with a 'subscribe' tag.
StoxBox Rating: Subscribe KRN Heat is well equipped to leverage multiple economic and industrial tailwinds, further strengthening its position in the market. The issue is valued at a P/E of 25.3x on the upper price band based on FY24 earnings, which is deemed to be fair. Therefore, we recommend a 'subscribe' rating for the issue.
SMIFS Rating: Subscribe "Given the current high dependency on the top 10 customers to generate significant sales, the company intends to focus on deepening its penetration in existing markets and expanding its customer network. This aims to reduce dependency on existing customers, mitigate related risks, and provide an opportunity to tap into new markets," said SMIFS.
"We recommend to subscribe to the issue as a good long term investment as the current valuations seems attractive given the huge capex the company is doing vis-a-vis current capacity, add to that the focus on exports further bolstering growth prospects & air-conditioning seeing the best growth amongst consumer durables in India over the next decade and improving margins," it said.