KRN Heat Exchanger IPO Day 1, the manufacturer of heat exchanger tubes, opens for subscription on Wednesday, September 25, with an issue target to raise nearly ₹342 crore. Earlier, the company had been able to garner ₹100.10 crore from 10 anchor investors when it had allotted 45.5 lakh equity shares to them at the price of ₹220 per share. It is a new issue completely, without an OFS component, with 1.55 crore fresh shares, and would remain open for subscription until Friday, September 27.
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KRN Heat Exchanger IPO Subscription Status
BSE data depicts an overall subscription of 24.09 times for the IPO till 5 pm on Wednesday. The retail investor segment registered 23.96 times subscription, and NIIs witnessed a huge subscription of 53.88 times. QIB portion recorded a relatively modest subscription rate of 1.44 times.
KRN Heat Exchanger IPO Key Details
Here are the top 10 key facts about the IPO of KRN Heat Exchanger that you need to know:
Grey Market Premium for KRN Heat Exchanger IPO: According to the grey market, insiders who are aware of the share price in the stock market are selling at a premium. KRN Heat Exchanger GMP is sitting at ₹239, which reflects a great deal of positivity from the investors’ side. While going by the GMP trend and the IPO price, there is an expectation that the stock price at the listing will be at ₹459 per share, which is a 108.64% premium on the listing day.
Price Band: The price band for the IPO is between ₹209 to ₹220 per share.
IPO Dates: The mainboard IPO has opened for subscription on Wednesday, September 25 and will close on Friday, September 27.
Issue Size: The IPO is a fresh issue of up to 1,55,23,000 equity shares of face value ₹10 each, for raising nearly ₹342 crore.
Lot Size: Minimum lot size for applying is 65 shares. Retail investors have to invest a minimum amount of ₹14,300 to apply in the IPO if the upper price band is ₹220. Maximum lots that retail investors can apply for is 13 lots.
Allotment Date: The company will finalize the allotment on Monday, 30 September. Successful applicants may expect the allotment of their shares being credited into their demat account by Tuesday, 01 October; those who are not allotted may expect the refunds are allotted on the same day.
IPO Registrar: The Company has officially declared Bigshare Services Private Limited as the registrar of the issue.
Listing Date: Shares of KRN Heat Exchanger will list on BSE and NSE on Thursday, 3rd October, 2013.
The proceeds from the IPO are proposed to be utilized by the company in its wholly-owned subsidiary, namely KRN HVAC Products Private Limited, for setting up the new manufacturing facility at Neemrana, Alwar, Rajasthan. A portion of the proceeds will also be used for general corporate purposes.
Company Overview KRN Heat Exchanger is a company that deals with the manufacture of heat exchangers with fins and tubes for the HVAC as well as refrigeration industries. It covers sheet metal components, evaporator units, copper parts, evaporator coils, as well as fluid and steam coils in its range of products. The company has witnessed good growth for previous years; it had profits totaling ₹11 crore for FY22, over ₹32 crore for FY23, and increased to ₹39 crore for FY24.
Therefore, should one invest in the KRN Heat Exchanger IPO? Industry experts seem promising about the IPO, pending growth drivers and valuation.
According to Sagar Shetty, a research analyst with StoxBox, the Indian HVAC market is now firmly on a growth trajectory. Key drivers for growth consist of rapid urbanization, growing disposable incomes, government initiatives, and a growing demand for energy-efficient solutions. The company is just poised to ride on those developments.
“The issue is valued at a price-to-earnings (P/E) ratio of 25.3 times at the upper price band based on FY24 earnings. The valuation is fair, and hence, this IPO has good value for investors who are looking for growth. We have a ‘subscribe’ rating for the issue,” said Shetty.
Financial Performance.
KRN Heat Exchanger has showcased sound financial performance in the preceding years. During FY24, the Company had revenues of ₹3,083 mn, EBITDA of ₹585 mn and profit after tax of ₹391 mn. The EBITDA margin stayed at 18.9 per cent, while PAT margin remained at 12.6 per cent. The strong margins visible here reflect, therefore, operational efficiency and profitability of the firm. KRN has also managed to conserve RoE at 29.7% and RoCE at 24.2%. This has cushioned the returns on the equity shareholders. D/E is at 1, signifying that the structure is not leaning towards either long-term debt or equity as the capital is balanced.
Risks and Considerations
While prospects of the company look bright, there is still some risk in it. As has been rightly pointed out by Arun Kejriwal founder of Kejriwal Research and Investment Services, KRN Heat Exchanger primarily manufacture components like heat exchangers meant for companies in the HVAC and refrigeration sectors. This makes it a vendor and not an end-product manufacturer. In that way, its growth will depend on customers such as those in the AC and refrigeration industries, which may be a risk factor.
For example, Kejriwal added that the Indian primary market has been becoming increasingly crowded lately with various IPOs vying for attention from investors. As per him, those investors who have a high-risk appetite could consider applying to this IPO; the primary reason for listing would be to garner listing gains rather than long-term investment.
“This company is not manufacturing any end-use products but is providing components to AC and refrigeration companies. So, it is more or less a vendor, which can be viewed as a limitation. But considering positive sentiment in the market, people comfortable with the high-risk investment may apply for listing gains,” said Kejriwal.
Conclusion
The KRN Heat Exchanger IPO is one of the most promising investments, as it considers such a crucial aspect as growing sectors in HVAC and refrigeration. Indeed, promises of fair valuation, strong financial performances, and promising growth prospects are enough to inspire interest among investors.
Company enjoys a good position in a growth market, planned expansion for years to come, and scope for further increase in growth in HVAC. Taking into account all this, it is a buy-and-hold candidate for a long-term investor; on the other hand, a short-term-focused investor can also benefit from listing gains supported by positive sentiment and strong grey market demand.
However, risks would be there in relation to the dependence of the company’s growth more on industries other than itself; moreover, the main market is highly competitive. Subscription to the IPO would have then to be underpinned by investment goals in the light of risk tolerance.