The initial public offering (IPO) of KRN Heat Exchanger, a prominent manufacturer of heat exchanger tubes, opened for subscription on Wednesday, September 25, aiming to raise around ₹342 crore. Ahead of the IPO, the company successfully raised ₹100.10 crore from 10 anchor investors, allocating 45.5 lakh equity shares at ₹220 per share. The IPO, comprising a fresh issue of 1.55 crore shares, will close on Friday, September 27.
Here, we will provide an in-depth look at the KRN Heat Exchanger IPO, including essential details, financial metrics, and expert opinions, to help potential investors make an informed decision.
KRN Heat Exchanger IPO Key Details
1. Grey Market Premium (GMP)
The grey market premium (GMP) for the KRN Heat Exchanger IPO is currently trading at ₹239, reflecting robust investor sentiment. Based on the GMP trend and the IPO’s upper price band of ₹220, the shares are expected to list at a premium of 108.64%, which would equate to ₹459 on the stock exchanges.
2. Price Band
The price band for the KRN Heat Exchanger IPO has been set at ₹209 to ₹220 per share. Investors can apply for the issue within this price range.
3. IPO Dates
- Opening Date: September 25, 2024
- Closing Date: September 27, 2024
The three-day subscription window provides ample opportunity for interested parties to participate in this public offering.
4. IPO Size
The total issue size is 1,55,23,000 shares, with a fresh issue component only, amounting to a value of ₹342 crore. The company aims to use the proceeds for expansion and general corporate purposes, with no Offer for Sale (OFS) involved.
5. Lot Size and Investment Requirements
The minimum lot size is 65 shares, which means investors need to invest at least ₹14,300 at the upper price band of ₹220 per share. Retail investors can apply for a maximum of 13 lots, translating to 845 shares or an investment of approximately ₹1,10,950.
6. Allotment and Listing Dates
- Allotment Date: September 30, 2024
- Demat Credit: October 1, 2024
- Refund Date: October 1, 2024
- Listing Date: October 3, 2024, on both the BSE and NSE.
7. Registrar for the IPO
Bigshare Services Private Limited is the official registrar of the KRN Heat Exchanger IPO, responsible for managing the share allotment process and investor inquiries.
8. Listing on Major Stock Exchanges
KRN Heat Exchanger will debut on the BSE and NSE on October 3, subject to successful subscription and regulatory approvals.
9. Objective of the Issue
According to the Red Herring Prospectus (RHP), the company plans to use the net proceeds to fund the development of a new manufacturing facility for its wholly-owned subsidiary, KRN HVAC Products Private Limited, located in Neemrana, Alwar, Rajasthan. Additional funds will be allocated for general corporate purposes, which include furthering its market reach and boosting operational capabilities.
10. Company Overview
KRN Heat Exchanger is a key player in the HVAC (heating, ventilation, and air conditioning) and refrigeration industries, with a product range that includes heat exchangers, evaporator units, sheet metal components, and fluid and steam coils. The company serves several industries, providing high-quality, energy-efficient products to meet growing demands for HVAC solutions.
Financial Performance of KRN Heat Exchanger
KRN Heat Exchanger has demonstrated significant growth in recent years, with profits climbing from ₹11 crore in FY22 to ₹39 crore in FY24. This upward trajectory is a testament to the company’s operational efficiency and market penetration.
- Revenue (FY24): ₹3,083 million
- EBITDA (FY24): ₹585 million
- PAT (FY24): ₹391 million
- EBITDA Margin: 18.9%
- PAT Margin: 12.6%
- Return on Equity (RoE): 29.7%
- Return on Capital Employed (RoCE): 24.2%
- Debt-to-Equity Ratio (D/E): 1.0
These financial metrics indicate that KRN Heat Exchanger is in a solid financial position, with a healthy balance sheet and robust profit margins.
Industry Outlook and Growth Prospects
The Indian HVAC industry is experiencing rapid growth, driven by urbanization, rising disposable incomes, and increasing demand for energy-efficient solutions. Government initiatives focusing on sustainability and climate control further bolster the industry’s expansion.
As a leading provider of heat exchangers, KRN Heat Exchanger is well-positioned to capitalize on these favorable market trends. Its focus on expanding its product portfolio, improving manufacturing capabilities, and exploring new markets will likely drive future growth.
Expert Recommendations
1. Sagar Shetty, Research Analyst at StoxBox
Shetty has expressed optimism about the IPO, highlighting KRN Heat Exchanger’s strong financial performance and strategic growth plans. “Given the current valuation and the company’s prospects, we recommend a ‘subscribe’ rating for long-term investors,” he said. The stock is priced at a P/E ratio of 25.3 times at the upper price band, which is deemed fair based on FY24 earnings.
2. Arun Kejriwal, Founder of Kejriwal Research and Investment Services
Kejriwal has recommended the IPO for investors with a high-risk appetite, especially those looking for listing gains. However, he cautioned that the company primarily operates as a vendor to HVAC manufacturers, meaning its business model could face challenges in a competitive and crowded market. “Investors should carefully evaluate their risk tolerance before applying for the issue,” he added.
Should You Apply for the KRN Heat Exchanger IPO?
Considering the company’s solid financial track record, robust grey market premium, and growth potential in the rapidly expanding HVAC sector, the KRN Heat Exchanger IPO presents an attractive investment opportunity. While experts recommend the IPO for long-term investors, those seeking listing gains should also find it appealing, given the expected premium on the stock’s debut.
That said, investors are advised to conduct their own due diligence or consult financial experts before making any investment decisions, as all investments come with inherent risks.
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