💰 Financial Performance

Revenue Growth by Segment

Consolidated revenue grew 39.43% YoY from INR 308.28 Cr in FY24 to INR 429.85 Cr in FY25. Standalone Q2 FY26 total income reached INR 227.22 Cr, a 126% increase from INR 100.48 Cr in Q2 FY25, driven by capacity ramp-up at the Neemrana facility and strong demand in the HVAC and refrigeration segments.

Geographic Revenue Split

H1 FY26 export revenue is dominated by the United Arab Emirates at 47.43%, followed by the USA at 20.01%, Canada at 18.86%, Italy at 11.07%, and other regions at 2.63%. This diversification reduces reliance on the Indian domestic market and leverages global HVAC demand.

Profitability Margins

Net Profit Margin for FY25 was 12.30%, a slight decrease from 12.78% in FY24. Return on Net Worth significantly decreased from 41.87% in FY24 to 16.81% in FY25, primarily due to the expanded equity base following the IPO and listing on BSE and NSE.

EBITDA Margin

Operating Profit Margin stood at 16.40% in FY25, down from 18.96% in FY24. Q2 FY26 EBITDA was INR 29.60 Cr, up 69% YoY from INR 17.56 Cr, though the EBITDA margin for the quarter was approximately 13.02%, impacted by inventory timing and raw material price fluctuations.

Capital Expenditure

The company is scaling capacities through its subsidiary, KRN HVAC Products Private Limited, which commenced production at the Neemrana plant on May 31, 2025. While specific total INR Cr for future capex is not explicitly totaled, the investment includes the acquisition of the Bus AC division of Sphere Refrigeration Systems.

Credit Rating & Borrowing

CRISIL has assigned an 'A-' rating with a 'Stable' outlook for bank facilities. The company's debt-equity ratio improved significantly from 0.46 in FY24 to 0.07 in FY25, indicating a low-leverage profile and high financial discipline.

⚙️ Operational Drivers

Raw Materials

Copper and Aluminum are the primary raw materials for heat exchangers. Operating margins are highly susceptible to volatility in these commodity prices and foreign exchange rates, as these materials often constitute a significant portion of the cost of goods sold.

Import Sources

Not specifically disclosed in available documents, though the company mentions exposure to global demand-supply conditions and anti-dumping duties, suggesting international sourcing for key metals.

Capacity Expansion

KRN HVAC Products Private Limited (subsidiary) commenced commercial operations on May 31, 2025, at the RIICO Industrial Area, Neemrana. This expansion is designed to meet the growing demand in the HVAC and transport cooling sectors.

Raw Material Costs

Raw material costs are a major operational risk; the company manages this by passing through price increases to customers, typically with a one-quarter lag. This strategy helps maintain long-term margins despite short-term fluctuations of 2-3% in EBITDA.

Manufacturing Efficiency

The Neemrana facility is delivering efficiency gains that optimize costs and improve delivery timelines. The company maintains a Current Ratio of 4.52, indicating high liquidity to support operational needs.

📈 Strategic Growth

Expected Growth Rate

126%

Growth Strategy

Growth is driven by forward integration into the automotive HVAC segment via the acquisition of Sphere Refrigeration's Bus AC division, targeting the INR 50,000 Cr data center cooling market, and expanding the global footprint in the UAE, USA, and Europe.

Products & Services

Heat exchangers, HVAC components, bus air-conditioning units, bar and plate heat exchangers, and specialized tubing for refrigeration.

Brand Portfolio

KRN Heat Exchanger and Refrigeration.

New Products/Services

Bus Air-Conditioning systems and specialized cooling solutions for Data Centers are the primary new growth drivers, with the Bus AC division acquired in H1 FY26.

Market Expansion

Targeting the transport cooling and automotive HVAC segments through the newly acquired division and expanding existing heat exchanger sales to data center clients.

Strategic Alliances

KRN HVAC Products Private Limited signed a Business Transfer Agreement (BTA) to acquire the Bus Air-Conditioning division of Sphere Refrigeration Systems Private Limited.

🌍 External Factors

Industry Trends

The HVAC industry is seeing strong demand from infrastructure expansion and sustainability goals. The data center cooling market in India is identified as a significant INR 50,000 Cr opportunity.

Competitive Landscape

The company competes in the specialized heat exchanger market, where technical certifications (ISO 9001:2015) and the ability to handle complex ecosystems are key differentiators.

Competitive Moat

The moat is built on 20+ years of promoter experience, established long-term relationships with global OEMs like Daikin, and high entry barriers due to stringent technical and quality specifications.

Macro Economic Sensitivity

Highly sensitive to global commodity cycles (Copper/Aluminum) and Indian infrastructure expansion, which drives demand for HVAC and refrigeration products.

Consumer Behavior

Increasing demand for energy-efficient and sustainable cooling solutions is shifting market preference toward KRN's high-specification heat exchangers.

Geopolitical Risks

Trade barriers, such as anti-dumping duties, and economic developments in key export markets like the UAE and USA could impact profitability.

⚖️ Regulatory & Governance

Industry Regulations

Operations are subject to labor laws, environmental permits, and technical standards. Non-compliance could lead to penalties or operational restrictions, mitigated by regular audits.

Environmental Compliance

Maintains ISO certifications and complies with local/national environmental norms regarding emissions and hazardous materials; investments are made in energy-efficient technologies.

Taxation Policy Impact

The company monitors changes in tax regimes and labor codes. In FY25, the provision for taxation for the KRN HVAC subsidiary was INR 37.85 Lakhs on a profit of INR 316.09 Lakhs.

Legal Contingencies

The company reports a harmonious labor environment with no major disputes in the past three years. No material litigation or significant orders passed by regulators were noted for the review period.

⚠️ Risk Analysis

Key Uncertainties

Volatility in raw material costs and forex rates could impact margins by 2-3% per quarter. Customer concentration risk remains high due to reliance on Daikin.

Geographic Concentration Risk

47.43% of export revenue is concentrated in the UAE, making the company sensitive to the economic and regulatory environment of the Middle East.

Third Party Dependencies

High dependency on key customers for order volumes and potentially on specific metal suppliers for high-grade copper and aluminum.

Technology Obsolescence Risk

The company faces risks from evolving HVAC technologies; it mitigates this through continuous R&D and the acquisition of new technological capabilities in the automotive HVAC segment.

Credit & Counterparty Risk

Debtors turnover ratio of 5.91 times indicates moderate credit risk; the company maintains a robust internal control framework to monitor financial integrity.