Hem Securities has issued a “SUBSCRIBE” recommendation for the KRN Heat Exchanger and Refrigeration Limited IPO, with a price band set at ₹209-220 per share. This IPO aims to raise between ₹325-342 crore, underscoring the company’s growth potential within the HVAC&R (Heating, Ventilation, Air Conditioning, and Refrigeration) industry. The company’s strong financial performance, advanced manufacturing capabilities, and long-standing relationships with major clients are key drivers behind the positive outlook. Below is a detailed breakdown of the IPO analysis and target for investors.

Robust Growth in the HVAC&R Industry

KRN Heat Exchanger is well-positioned within the HVAC&R sector, offering a diversified product range and extensive market reach.
The company manufactures fin and tube-type heat exchangers primarily made from non-ferrous metals like copper and aluminum. Its products serve a wide range of applications in air conditioning, heating, ventilation, refrigeration, and process cooling. With the Indian HVAC market expected to grow at a compound annual growth rate (CAGR) of 14.5% until 2029, KRN is well-positioned to capitalize on this booming demand, especially as it integrates advanced, energy-efficient designs into its product offerings.

Financial Performance and Valuation

KRN has demonstrated consistent growth with a robust financial track record.
Over the last three financial years, the company’s revenue from operations increased at a CAGR of 25.46%, with export sales growing at an impressive 44.71%. For FY24, KRN’s revenue stood at ₹30,828.31 million, up 24% year-on-year. With an EBITDA margin of 18.96% and net profit growing to ₹3,906.86 million, the company’s post-issue price-to-earnings (P/E) multiple stands at 27x. Hem Securities believes this valuation is reasonable given KRN’s established market presence, operational efficiencies, and long-term growth potential.

Strong Client Relationships and Technological Expertise

KRN enjoys strong, long-term relationships with top-tier clients, supported by its technologically advanced manufacturing capabilities.
The company’s key clients include Daikin Airconditioning India, Schneider Electric, Kirloskar Chillers, and Blue Star, among others. KRN's state-of-the-art manufacturing facility in Neemrana, Rajasthan, is equipped to carry out end-to-end production processes, from design to quality testing. This vertical integration allows the company to maintain strict control over quality while ensuring cost competitiveness, which strengthens its ability to secure repeat orders from its prestigious clientele.

IPO Utilization and Expansion Plans

The IPO proceeds will primarily be used to fund KRN’s expansion through its wholly-owned subsidiary, KRN HVAC Products Private Limited.
The fresh issue of ₹342 crore will be directed toward setting up a new manufacturing facility in Neemrana, Alwar, Rajasthan. This expansion is expected to enable forward integration by allowing KRN to produce additional value-added products and increase its control over distribution and marketing. These efforts will strengthen the company’s supply chain, improve profitability, and allow greater customer reach in both domestic and international markets.

Target Price and Investor Outlook

Hem Securities has given a “SUBSCRIBE” rating, signaling strong growth prospects for KRN Heat Exchanger.
The IPO is priced at a reasonable valuation of ₹209-220 per share, with the potential for significant upside due to the company’s proven financial performance and market positioning. Investors are advised to participate in the offering to capitalize on the company's continued growth in the HVAC&R industry, especially given its strong balance sheet and strategic expansion plans.

In conclusion, the KRN Heat Exchanger IPO offers an attractive investment opportunity, backed by the company’s established market position, impressive financial track record, and robust growth strategies. Investors looking for exposure to the fast-growing HVAC&R sector should consider subscribing to this IPO for potential long-term gains.