KRN Heat Exchanger IPO Update: GMP hints at multibagger gains, subscription status, review, other key details

KRN Heat Exchanger IPO Update: Rajasthan-based KRN Heat Exchanger is selling its shares in the price band of Rs 209-220 apiece. Investors can apply for a minimum of 65 shares and its multiples thereafter.

KRN Heat Exchanger IPO Update: The initial public offering of heat exchanger tubes manufacturer KRN Heat Exchanger opened for subscription on Wednesday, September 25, to raise about ₹342 crore. Ahead of the IPO, the company raised ₹100.10 crore from 10 anchor investors. The company allocated 45.5 lakh equity shares to anchor investors at a price of ₹220 per shares. The book-built IPO, which is entirely a fresh issue of 1.55 crore shares and has no offer for sale (OFS) component, will conclude on Friday, September 27.

Company Overview
KRN Heat Exchanger has established itself as a player in the HVAC and refrigeration sectors, manufacturing a diverse range of heat exchangers with fins and tubes. Its product portfolio includes sheet metal components, header/copper parts, evaporator units, evaporator coils, and fluid and steam coils. The company's robust growth trajectory is evident in its financial performance, with profits surging from Rs 11 crore in FY22 to Rs 32 crore in FY23, and further rising to Rs 39 crore in FY24.

KRN Heat Exchanger IPO Subscription Status
As of 3:35 pm on the opening day, the KRN Heat Exchanger IPO had witnessed an overall subscription of 18 times, indicating strong demand across investor categories. The portion reserved for retail investors has been subscribed 19 times, The non-institutional investor category experienced a surge in demand, with a subscription of 37.2 times, and the QIB segment saw a subscription of 1.22 times.

Grey Market Premium (GMP)
The KRN Heat Exchanger IPO has been making waves in the grey market, reflecting heightened investor enthusiasm. As of today, the shares are trading at a premium of Rs 239 per share, indicating that the stock is expected to list at Rs 459, a 108.64% premium over the upper price band of Rs 220.

"This facility will focus on producing bar and plate heat exchangers, oil cooling units with blowers and motors, and roll band evaporators. The expansion is expected to increase production capacity by six times, enabling KRN to enter new markets and industries. Long-term investors may find this growth potential attractive," it said.

Holani Consultants is the sole book-running lead manager of the KRN Heat Exchanger IPO, while Bigshare Services is the registrar for the issue. Shares of the company shall be listed on both BSE and NSE, with Thursday, October 3 as the tentative date of listing on the bourses.

Utilization of IPO Proceeds
The funds raised through the IPO will primarily be used for investment in KRN Heat Exchanger's wholly-owned subsidiary, KRN HVAC Products Private Limited, to set up a new manufacturing facility in Neemrana, Alwar, Rajasthan. This expansion is expected to enhance the company's manufacturing capabilities and support its growth in the HVAC and refrigeration sectors. Additionally, a portion of the proceeds will be allocated for general corporate purposes.

Financial Performance
KRN Heat Exchanger's financial growth adds to the attractiveness of this IPO. The company reported a profit of Rs 11 crore in FY22, which jumped to Rs 32 crore in FY23 and further increased to Rs 39 crore in FY24.

Anchor Investor Participation
Before the IPO opening, KRN Heat Exchanger successfully raised Rs 100.10 crore from 10 anchor investors, signaling strong institutional confidence in the company. The company allocated 45.5 lakh equity shares to anchor investors at Rs 220 per share.

IPO Allotment and Listing Details
The share allotment for the KRN Heat Exchanger IPO is expected to be finalized on Monday, September 30, 2024. Successful applicants will see the shares credited to their demat accounts on Tuesday, October 1, while refunds will be processed for those who do not receive an allotment on the same day. The company's shares are anticipated to be listed on both the BSE and NSE on Thursday, October 3, 2024.

KRN Heat Exchanger IPO: Apply or not?

Reasons to Buy the KRN Heat Exchanger IPO

• Strong Market Growth: The HVAC market in India is expanding rapidly due to urbanization, rising incomes, government initiatives, and the need for energy-efficient solutions.
• Strategic Positioning: The company is well-positioned to benefit from economic and industrial growth, enhancing its market position.
• Fair Valuation: The IPO is valued at a P/E ratio of 25.3 times based on FY24 earnings, which is considered fair.
• Solid Financial Performance:
  • Revenue: ₹3,083 million
  • EBITDA: ₹585 million (18.9% margin)
  • PAT: ₹391 million (12.6% margin)
  • RoE: 29.7%
  • RoCE: 24.2%
  • D/E Ratio: 1 time
• Diversification Strategy: The company aims to expand its customer base across geographies and enhance its product range, reducing risk.

Reasons to Be Cautious on Buying KRN Heat Exchanger IPO

• High-Risk Investment: According to Arun Kejriwal, this IPO might be more suitable for investors with a high-risk appetite looking for short-term listing gains.
• Vendor Role: The company manufactures heat exchangers for refrigerator and air conditioner makers, meaning it doesn’t produce end-user products.
• Crowded Market: The Indian primary market is currently crowded, which might affect the IPO’s performance.