KRN Heat Exchanger To Ramp Up Exports With Capacity Expansion Under New Subsidiary

Fin and tube coil exporter KRN Heat Exchanger and Refrigeration Ltd. is building a new facility with capacity that is six times that of its current unit, with an aim to ramp up exports.

Chairman and Managing Director Santosh Kumar Yadav told NDTV Profit that he expects the enhanced capacity to sustain and further boost the company's growth rate that was recorded in the second quarter of the current financial year.

Elaborating on the need for expansion, he said, "If we talk about our capacities during our IPO, we were at an 85% utilisation. We are stretching the capacity to achieve it. That’s why we are looking at almost a 6x expansion with our new subsidiary."

KRN Heat Exchanger and Refrigeration reported a 28% year-on-year increase in consolidated revenue from operations in the September quarter to Rs 91.09 crore from Rs 71.19 crore in the same quarter a year ago. Net profit shot up 43% YoY to Rs 12.31 crore in the second quarter of FY2024–25 versus Rs 8.61 crore a year ago.

Ebitda rose 36.38% to Rs 19.55 crore against Rs 14.35 crore a year ago, while Ebitda margins stood at 21.17%.

Growth is expected to accelerate after the new facility begins operations, in April 2025, Yadav noted. This facility will be part of the company’s subsidiary, KRN HVAC Products Pvt.

Parent KRN Heat Exchanger and Refrigeration Ltd. is investing Rs 240 crore from its IPO proceeds to establish the new subsidiary.

“Based on the demand and supply we have, our current capacity is just up to the mark. Next two quarters, we will grow similarly. Our new facility will come up early next year. Then we will be able to grow faster as compared to this (current growth rate),” he said.

Production at the upcoming facility will begin in the second quarter of FY26, the KRN Heat Exchanger CMD revealed.

This fiscal, till now, exports have contributed 19% to the company's revenue against 17% in the preceding one, which was a result of the company's special focus on North America and Europe.

The new venture also aims to tap into the opportunities in the export business. “We are planning to set up a warehouse in the US next year and we are also expanding our sales. We have an exhibition in February in Orlando. So we are targeting North America and Europe in terms of the new line of products and we have made the new capacity keeping them in mind,” Yadav said.

KRN Heat Exchanger is confident of sustaining margins in the next two quarters as its business will run with the same capacity utilisation.

“With the new venture, we are targeting to increase it,” added Yadav.

The new venture, KRN HVAC Products Pvt., will help increase margins, Yadav said, as the company is "adding solar, which will bring down our electricity cost".

He added, "Secondly, we have better margins in export than domestic. We are expecting that with increased exports, our margins will become more positive. We will also get incentives from the government for the new venture. All these reasons will help us slightly better the margins.”