KRN Heat Exchanger IPO subscribed 92x on Day 3 so far; GMP hints at bumper listing gains

The initial public offering (IPO) of KRN Heat Exchanger and Refrigeration saw a spectacular response from the investors during the second day of the bidding process. The issue was booked a total of nearly 24 times on first day subscription and ended day two with nearly 59 times bidding.
 

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. It is looking to raise Rs 341.95 crore via IPO, which is entirely a fresh share sale of 1,55,43,000 equity shares.
 

According to the data, the investors made bids for 1,00,63,07,900 equity shares, or 91.52 times, compared to the 1,09,93,000 equity shares offered for the subscription by 12.25 pm on Friday, September 27. The three-day bidding for the issue, which opened on Wednesday, September 25, concludes today.
 

The allocation for non-institutional investors (NIIs) was subscribed 247.44 times, while the portion reserved for retail investors saw a subscription of 72.80 times. However, the quota set aside for qualified institutional bidders (QIBs) saw bids for 4.93 times for their allocations as of the time.
 

KRN Heat Exchanger and Refrigeration is a manufacturer of fin and tube-type heat exchangers, offering copper and aluminium fins and copper tubes, heat exchangers, water coils, condenser coils, and evaporator coils. All the products offered are used in the domestic, commercial, and industrial heating, ventilation, air conditioning and refrigeration industry.
 

The grey market premium of KRN Heat Exchanger has been hinting it as a multibagger in making, leading to a bumper bidding. Last heard, the company was commanding a premium of Rs 275 in the unofficial market, suggesting a listing pop of about 125 per cent for the investors. The GMP stood around Rs 250 when the issue opened for bidding.
 

Brokerage firms are mostly positive on the issue, suggesting to subscribe to it on the back of long-standing relationships, increasing capacity, new product development, experienced promoters, consistent financials and innovative product range. However, dependence on select customers, sharp increase in input costs and short-term contracts are key concerns.
 

"Given the current high dependency on the top 10 customers to generate significant sales, the company intends to focus on deepening its penetration in existing markets and expanding its customer network. This aims to reduce dependency on existing customers, mitigate related risks, and provide an opportunity to tap into new markets," said SMIFS.
 

"We recommend to subscribe to the issue as a good long term investment as the current valuations seems attractive given the huge capex the company is doing vis-a-vis current capacity, add to that the focus on exports further bolstering growth prospects & air-conditioning seeing the best growth amongst consumer durables in India over the next decade and improving margins," it said.
 

Ahead of its IPO, KRN Heat Exchanger and Refrigeration has raised Rs 100.1 crore from 10 anchor investors by allocating 45.5 lakh shares at Rs 220 apiece. It has reserved 50 per cent of the net offer for qualified institutional bidders (QIBs) and 35 per cent for the retail investors. Remaining 15 per cent shares all be allocated towards non-institutional investors (NIIs).
 

Ahead of its IPO, KRN Heat Exchanger raised Rs 100.1 crore from 10 anchor investors by allocating 45.5 lakh shares at Rs 220 apiece. It reported a net profit of Rs 39.07 crore with a revenue of Rs 313.54 crore for the financial year ended on March 31, 2024. Its bottomline came in at Rs 32.31 crore with revenue of Rs 249.89 crore for the fiscal year 2022-23.
 

At the upper price band of Rs 220, KRN Heat Exchanger is valued at FY24 P/E multiple of 35 times based on its post issue capital. The issue appears attractive given the healthy growth track record of the company. KRN’s revenue, Ebitda and PAT has grown at a CAGR of 40.5 per cent, 86.1 per cent and 92.1 per cent respectively over FY22-24, said SBI Securities.
 

"The IPO proceeds will be utilized by the company to fund for establishing a new manufacturing unit in Rajasthan which will help expand its product portfolio and distribution channel. We recommend subscribing to the issue for a long-term investment horizon," 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.