IPO with 100 per cent GMP – Key details you can't overlook
Between FY22 and FY24, the company recorded a Compound Annual Growth Rate (CAGR) of 41 per cent in revenue and 92 per cent in net profit.
About the issue
KRN Heat Exchanger and Refrigeration Ltd is preparing to launch its Initial Public Offering (IPO) for equity shares. Below are the issue details.
| IPO Details |
| IPO Opening Date |
September 25, 2024 |
| IPO Closing Date |
September 27, 2024 |
| Issue Type |
Book Built Issue IPO |
| Face Value |
Rs 10 per equity share |
| IPO Price |
Rs 209 to Rs 220 per equity share |
| Min Order Quantity |
65 shares |
| Listing At |
BSE, NSE |
| Total Issue |
15,543,000 shares of FV Rs 10* |
| (Aggregating up to Rs 341.95 Cr)* |
| Fresh Issue |
15,543,000 shares of FV Rs 10* |
| (Aggregating up to Rs 341.95 Cr)* |
| QIB Shares Offered |
50% of the Offer |
| Retail Shares Offered |
35% of the Offer |
| NII (HNI) Shares Offered |
15% of the Offer |
| *At Upper Price Band |
|
Objects of the Issue
Considering that the offer is exclusively a fresh issue, it is important to note that the company will directly profit from the offer proceeds. The net proceeds from the fresh issue will be used by the company to invest in its wholly owned subsidiary, KRN HVAC Products Pvt Ltd, for establishing a new manufacturing facility in Neemrana, Alwar, Rajasthan, as well as for general corporate purposes.
Promoter holding
Santosh Kumar Yadav, Anju Devi, and Manohar Lal are the promoters of the company. The promoters and promoter group currently hold a pre-issue shareholding stake of 94.39 per cent in the company.
DSIJ's 'Value Pick' service recommends long-term stocks based on Value Investing Philosophy. If this interests you, do download the service details here.
Company profile
The company manufactures fin and tube-type heat exchangers for the Heating, Ventilation, Air Conditioning, and Refrigeration (HVACR) industry. It produces heat exchangers in various shapes and sizes based on customer requirements and market demand, with tube diameters ranging from 5 mm to 15.88 mm.
The product range includes condenser coils, evaporator units, evaporator coils, header/copper parts, fluid and steam coils, and sheet metal components. These products are well-suited for a wide range of applications, including air conditioning, heating, ventilation, refrigeration, and process cooling.
All manufacturing operations are conducted at the company’s consolidated facility, which spans two industrial plots located in the RIICO Industrial Area, Neemrana, Rajasthan.
The company exports to several countries, with its primary markets including the United Arab Emirates, USA, and Italy.
The company has established long-term relationships with key customers, including Daikin Airconditioning India Pvt Ltd, Schneider Electric IT Business India Pvt Ltd, Kirloskar Chillers Pvt Ltd, and Blue Star Ltd.
Financials
| Rs (in crore) |
FY22 |
FY23 |
FY24 |
| Revenue |
158.23 |
249.89 |
313.54 |
| Profit before tax |
14.97 |
45.50 |
55.73 |
| Net profit |
10.59 |
32.31 |
39.07 |
The company has consistently delivered strong growth in both revenue and profits over the past few years. Between FY22 and FY24, the company recorded a Compound Annual Growth Rate (CAGR) of 41 per cent in revenue and 92 per cent in net profit. In FY24, the company reported an outstanding Return on Equity (RoE) of 41 per cent and a Return on Capital Employed (RoCE) of 31 per cent.
Valuation and outlook
The issue is priced with a P/BV ratio of 7.71 times, calculated using its Net Asset Value (NAV) of Rs 28.53 as of March 31, 2024. At the upper price cap, it is priced at a P/BV ratio of 2.83 times, considering its post-IPO NAV.
When we calculate the PE ratio for the company by considering the FY24 earnings relative to the fully diluted paid-up equity capital, the resulting PE ratio stands at 25.
The company stated that there are no listed companies in India operating a business similar to theirs, making it impossible to provide a comparison of the industry's key performance indicators with those of the company.
However, the valuation is justified by the company's strong growth performance and the potential for attractive returns.
The industry's future looks promising, fuelled by several key factors. The increasing demand for energy-efficient heating, ventilation, and air conditioning (HVAC) solutions aligns with global sustainability goals, driving innovation and investment. Additionally, advancements in technology, such as smart HVAC systems and environmentally friendly refrigerants, are enhancing product offerings and operational efficiency. Urbanization and the growth of infrastructure projects are further propelling demand for HVAC and refrigeration systems in residential, commercial, and industrial applications.
Therefore, we recommend subscribing to the issue with a long-term investment outlook for its promising growth prospects.