KRN Heat Exchanger and Refrigeration Limited
Company
| Website 🔗 |  |
| Business Activity | Manufacture |
| Division | HVAC&R |
| Sub-class | Fin and Tube Heat Exchangers |
| Location | Neemrana, Rajasthan |
| Establishment Year | 2017 |
Management
| Managing Director | Santosh Kumar Yadav |
| Educational Qualifications | Diploma in Business Management from the Institute of Management Technology, Ghaziabad Diploma in Mechanical Engineering from the Board of Technical Education, Rajasthan |
| Experience | Over 19 years of experience in the manufacturing of heat exchangers and refrigeration units |
| Annual Salary | ₹ 60 Lakhs |
| Total Number of Employees | 553 |
About
KRN Heat Exchanger and Refrigeration Limited is an Indian manufacturer specializing in the production of fin and tube heat exchangers, catering primarily to the heating, ventilation, air conditioning, and refrigeration (HVAC&R) industry.
Products and Services:
KRN Heat Exchanger and Refrigeration Limited offers a variety of products and services, including:
- Evaporator Coils
- Condenser Coils
- Fluid and Steam Coils
- Condensing Units and Air-Cooling Units
- Headers/Copper Parts
- Sheet Metal Parts
Clients:
KRN serves a variety of sectors, including commercial, industrial, and residential air conditioning, as well as refrigeration and process cooling applications.
The end consumers of KRN Heat Exchanger and Refrigeration Limited’s products and services are primarily the original equipment manufacturers (OEMs) in the heating, ventilation, air conditioning, and refrigeration (HVAC&R) industry. These OEMs integrate KRN’s heat exchangers into their products, which are then used in various applications across different sectors, including:
- Residential and commercial buildings
- Industrial facilities
- Data centers
- Transportation (railways, metros, buses)
- Process cooling equipment
List of Key Clients:
Daikin Airconditioning India Private Limited
Schnieder Electric IT Business India Private Limited
Kirloskar Chillers Private Limited
Blue Star Limited
Climaventa Climate Technologies Private Limited
Manufacturing Process:
Fin Processing:
This involves stamping and shaping fins on aluminium sheets using a fin press.
Hair Tube Bending:
Automated CNC-controlled machines bend copper tubes into precise shapes and sizes.
Expander:
Vertical and horizontal expanders join fin sheets and copper tubes.
Brazing:
This process joins U-bends, headers, and distributors to the heat exchanger, ensuring efficient refrigerant flow and heat transfer.
Leak Testing:
Helium and water leak tests are conducted to identify any leaks in the heat exchangers.
Coil Bending:
Bending machines fold the heat exchanger into the desired shape for optimal space utilization.
Dry Oven and Flushing:
This process removes moisture and contaminants, preventing corrosion and extending product life.
Coating:
Nano-coatings and powder coatings are applied to protect the heat exchangers from corrosion.
Final Inspection and Packaging:
Thorough inspections are conducted before charging the parts with dry nitrogen and packaging them for shipping.
Raw Materials:
The key raw materials used by the company include:
- Aluminium foil
- Copper foil
- Copper tube (Imported)
- Galvanized sheet
- Brass sheet/brass parts
- Copper sheet
- Aluminium sheet
- Stainless steel
Suppliers:
KRN Heat Exchanger and Refrigeration Limited maintains a strong network of over 510 suppliers, ensuring a consistent and reliable supply of raw materials.
Other Key Aspects:
Certifications:
The company adopted the following globally recognized standards:
- Quality management systems: ISO 9001:2015 certification for the facilities.
- Environmental Management Systems: ISO 14001:2015 certification for the facilities.
- Occupation health and safety management systems: ISO 45001:2018 certification for the facilities
Manufacturing Process Flowchart
Revenue – Category
Revenue – Region
Audit and Legal
Auditor’s Remarks:
The auditors have issued an unqualified opinion on the company’s financial statements
Non-Compliances and Other Issues:
The company has been late in depositing provident fund contributions for certain employees on several occasions between FY 2022 and FY 2024. These delays have resulted in the company being penalized with fines.
Failure to register under the Contract Labour (Regulation and Abolition) Act, 1970, until 2019 for payments to its employees between 2018 and 2022.
Contingent Liabilities:
KRN Heat Exchanger and Refrigeration Limited has contingent liabilities amounting to ₹21.9 Crore as of March 31, 2024, as following
- Under Direct Tax: ₹146.84 lakhs
- Under Indirect Tax: ₹7.02 lakhs
- Letter of Credit: ₹1,540.68 lakhs
- Bank Guarantees: ₹270.73 lakhs
- Under EPCG/ Advance Authorisation Import Duty Benefit received from DGFT, not considered as a liability until it fulfils the Export Obligation: ₹224.64 lakhs
Legal Cases:
Cases Filed Against the Company
M/s Advent Trading Pvt Ltd vs. Mrs Anju Devi
Advent Trading Pvt Ltd filed a case against KRN’s promoter and director, Mrs Anju Devi, and Mr Santosh Kumar Yadav, regarding the non-recovery of a loan of ₹ 15,00,000/-.
Cases Filed by the Company
M/s K.R.N. Heat Exchanger and Refrigeration Vs. Reynold India Private Limited
A case was filed by KRN for recovery of an outstanding amount of Rs. 13,70,000/- along with 18% interest owed by Reynold India Private Limited.
M/s Micro Coils and Refrigeration (P) Ltd. Vs. Mr Santosh Kumar Yadav and Others
- An appeal was filed against KRN’s promoter and managing director, Mr Santosh Kumar Yadav, by M/s Micro Coils Refrigeration Pvt. Ltd. under Section 37 of the Arbitration and Conciliation Act, 1996.
- The appeal challenges an order dismissing an application to restrain Mr Yadav from soliciting the appellant’s suppliers or clients.
Shri Manoj Kapoor and Others vs Mr Santosh Kumar Yadav
- The claim was made before the Delhi International Arbitration Centre (DIAC) by Mr Manoj Kapoor and others against Mr Santosh Kumar Yadav.
- Claimants seek to recover Rs. 2,50,00,000/- for alleged losses suffered due to Mr Yadav’s breach of a Memorandum of Understanding (MOU).
Tax Proceedings against the Company:
Direct Tax:
- Assessment Year 2021-22: Disallowance of expenditure amounting to Rs. 26,61,198/-. Demand involved: Rs. 8,56,988/-
- Assessment Year 2023-24: Disallowance of expenditure amounting to Rs. 6,194/-. Demand involved: Not Quantifiable.
Indirect Tax:
- September 2023: Intimation in Form GST DRC-01C with respect to the difference in input tax credit availed in GSTR-3B and available as per GSTR-2B for the period September 2023 amounting to Rs. 1.47 Crore
SWOT Analysis
Strengths
| Long-standing customer relationships: The company has nurtured long-term relationships with prominent brands in the HVAC industry, ensuring a stable and reliable customer base. |
| Effective quality control measures: The company maintains stringent quality control checks and procedures throughout its production process, ensuring the delivery of high-quality products. |
| Consistent financial performance: The company has demonstrated consistent growth in terms of revenue and profitability, indicating its strong financial health and stability. |
| Established manufacturing facilities: The company possesses well-equipped and strategically located manufacturing facilities, enabling efficient production and timely delivery of products. |
Weaknesses
| Dependence on key customers: The company derives a significant portion of its revenue from a few key customers, posing a risk if these relationships are disrupted. |
| Lack of long-term contracts: The company does not have long-term contracts with either its customers or suppliers, leading to potential instability in its operations. |
| Reliance on overseas suppliers: The company relies heavily on overseas suppliers for its raw materials, exposing it to risks associated with international trade and geopolitical uncertainties. |
| Inventory management challenges: The company has faced challenges in accurately forecasting demand and managing inventory, leading to suboptimal utilization of resources. |
| Limited operating history: The company has a relatively limited operating history, making it difficult for investors to fully evaluate its historical performance and future prospects. |
Opportunities
| Expanding into new markets: The company can explore new geographical markets and industry segments to expand its customer base and reduce its dependence on a few key customers. |
| Strengthening local sourcing: The company can explore opportunities to strengthen its local sourcing of raw materials, reducing its reliance on overseas suppliers and mitigating associated risks. |
| Building a strong brand reputation: The company can focus on building a strong brand reputation through marketing and branding initiatives, enhancing its visibility and attracting new customers. |
| Developing new products and services: The company can invest in research and development to introduce new and innovative products and services, catering to the evolving needs of the HVAC industry. |
Threats
| Intense competition: The heat exchanger industry is highly competitive, with the presence of numerous domestic and international players. |
| Economic downturns: Economic slowdowns or recessions can adversely impact the demand for the company’s products and services. |
| Raw material price fluctuations: The prices of raw materials, especially copper and aluminium, are subject to volatility, which can impact the company’s profitability. |
| Technological disruptions: Rapid technological advancements in the HVAC industry may require continuous investments in research and development to stay competitive. |
Porter’s Five Forces1
| Threat of New Entrants | LOW – MODERATE |
| The heat exchanger industry requires significant capital investment and technical expertise, creating high entry barriers for new players. |
| Bargaining Power of Suppliers | LOW |
| The availability of numerous suppliers for raw materials reduces the bargaining power of individual suppliers. |
| Bargaining Power of Buyers | HIGH |
| The presence of multiple suppliers offering similar heat exchanger products increases the bargaining power of buyers, allowing them to negotiate competitive prices. |
| Threat of Substitute Products or Services | MODERATE |
| Cooling towers and heat pumps can serve as substitutes for heat exchangers in certain applications, posing a moderate threat. |
| Rivalry Among Existing Competitors | HIGH |
| The industry is highly competitive, with the presence of several large and established players, both domestically and internationally. |
Peer Comparison
There are no listed companies in India that engage in a business similar to that of KRN Heat Exchanger and Refrigeration Limited.
Green Box
Strong leadership and experienced management team:
The company benefits from a highly experienced and qualified leadership and management team with a deep understanding of the industry.
Research and Development:
The company has a dedicated in-house product design and development centre located in Neemrana, Rajasthan. This centre focuses on creating new heat exchanger designs that align with product specifications provided by customers and enhance product efficiency.
Positive Operating Cash Flow:
KRN Heat Exchanger and Refrigeration Limited has maintained a positive operating cash flow over the past three financial years.
End-to-End Manufacturing:
The company has a fully integrated manufacturing process, allowing it to convert raw materials into finished heat exchangers without relying on third-party vendors for intermediate processes. This setup gives KRN better control over product quality and cost efficiency compared to competitors who may outsource certain manufacturing steps.
IPO Funds:
Establishment of a new manufacturing unit located in Neemrana, Rajasthan. This capital expenditure is projected to require a total investment of ₹ 27,890.57 lakhs.
The new unit will focus on manufacturing different types of heat exchangers, including:
- Bar and Plate Heat Exchangers: These exchangers are used in various applications, such as railway locomotives, air compressors, and defence vehicles.
- Oil Cooling Units with Blower and Motor: These units are primarily used for cooling locomotives and automotive vehicles.
- Roll Bond Evaporators: These evaporators are used in refrigerators and offer design flexibility for direct cooling refrigeration systems.
Industry Outlook:
The global heat exchanger market is expected to grow at a CAGR of 8% from 2023 to 2030, reaching a projected value of USD 29.2 billion.
In India, the heat exchanger market is expected to grow at an even faster pace, with a projected CAGR of 11.6% from 2023 to 2030.
Amber Box
Debt-to-Equity Ratio: 0.45 (as of March 31, 2024)
Reliance on Overseas Suppliers:
The company heavily depends on overseas suppliers for a significant portion of its raw materials (78%). This reliance exposes the company to risks associated with international trade, such as currency fluctuations, geopolitical uncertainties, and potential disruptions in the supply chain.
Geographic Concentration:
The company’s manufacturing facilities and a significant portion of its sales are concentrated in a single geographical region. This concentration exposes the company to risks associated with regional economic downturns, natural disasters, or other unforeseen events that may disrupt its operations.
Red Box
Industry-Specific Risks:
The company is exposed to risks inherent to the heat exchanger industry, such as intense competition, rapid technological advancements, and fluctuations in raw material prices. These factors can impact the company’s profitability and market share.
Limited Operating History:
The company has a relatively short operating history, making it challenging for investors to thoroughly evaluate its long-term performance and resilience in the face of economic cycles and industry fluctuations.
Working Capital Requirements:
The company has significant working capital requirements, primarily to finance its inventory. Any challenges in securing adequate working capital financing could adversely affect the company’s operations and financial condition.
Customer Concentration:
33% of the company revenue for FY 2024 is contributed by Daikin Airconditioning India Private Limited.
Images
- The force value of “LOW” is considered good Click Porter’s Five Forces article for more information. ↩︎
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