KRN Heat Exchanger’s IPO Sets Market Abuzz with Impressive Debut

The stock of KRN Heat Exchanger and Refrigeration Ltd made an impressive debut in the Indian markets on Thursday, October 3, 2024. On the National Stock Exchange (NSE), it closed at ₹473.99 per share, representing a 115.45% premium over its initial public offering (IPO) price of ₹220. Similarly, it ended the day on the Bombay Stock Exchange (BSE) at ₹478.45, reflecting a 117.48% premium.

KRN Heat Exchanger’s shares were initially priced at ₹220, but they opened significantly higher on the debut day, with NSE opening at ₹480, up by 118.18%, and BSE at ₹470 per share, up by 113.64%. The company, which is headquartered in Rajasthan, initiated its public subscription process on September 25th and concluded it by September 27th.

The IPO was highly successful, receiving an overwhelming subscription rate of 214.42 times, with bids totaling over 2.35 billion shares for the mere 109.93 million shares available. Investors showed substantial interest in this IPO, especially the non-institutional investors, who oversubscribed their portion by 431.63 times, and the QIB (Qualified Institutional Buyers) segment, which saw subscriptions 253.04 times higher than the allocated amount. Retail individual investors also showed considerable interest, subscribing 98.29 times their allocated portion.

Rickied by strong fundamentals and significant market demand, the company’s financial performance has seen a marked improvement over recent years. KRN Heat Exchanger reported revenue growth from ₹156 crore in FY22 to ₹308 crore in FY24, with a compounded annual growth rate (CAGR) of 25% due to its robust order book and reputation among key customers. This growth has been mirrored in improved EBITDA and PAT margins as well.

Despite the stellar market reception, industry analysts like Arun Kejriwal from Kejriwal Research and Investment Services caution against premature exits, noting the heavy speculation observed in trading volumes, which exceeded 1.8 crore shares. Sagar Shetty advised investors to book profit from the listing gains but suggested waiting for a detailed financial performance review to reassess further investment decisions.

KRN Heat Exchanger specializes in manufacturing fin and tube-type heat exchangers for the HVAC (heat, ventilation, air conditioning) and refrigeration industry. The company operates a manufacturing unit in Neemrana, Rajasthan, housing a fully-integrated production facility.

The company’s success can largely be attributed to its extensive customer base, including major entities like Daikin Air Conditioning India Pvt Ltd, which contributes over 33% to the company’s revenue. The company’s client portfolio extends over 115 customers across different regions, allowing it to leverage international markets and expand its clientele.

However, KRN Heat Exchanger’s dependencies on a narrow client base and a limited number of suppliers are cited as notable risks. The lack of long-term agreements with key customers exacerbates this vulnerability, alongside the volatile nature of the raw materials market that could impact pricing.

Analysts such as Prashanth Tapse from Swastika Investmart Ltd stressed that despite the high IPO valuation, the absence of a direct comparison with listed peers makes KRN Heat Exchanger’s future performance difficult to predict. The stock’s grey market premium had been hovering around ₹248, highlighting strong investor interest even before its market debut.