About KRN Heat Exchanger & Refrigerator Limited

KRN Heat Exchanger and Refrigerator manufactures fin and tube type heat exchangers for the Heat Ventilation Air Conditioning and Refrigeration Industry (“HVAC&R”). Heat exchangers manufactured by them are made of non-ferrous metals primarily Copper and Aluminium. Their product range includes condenser coils, evaporator units, evaporator coils, header/copper parts, fluid and steam coils and sheet metal parts.

To enhance the longevity and corrosion resistance of heat exchangers and their components, various types of coatings such as nano coating, and powder coating are applied to the surfaces of copper tubes, brazing joints, and fin sheets. By applying these advanced coatings to heat exchangers and their components, their products ensure that the heat exchanger operates efficiently over an extended period, reducing maintenance costs and enhancing overall performance. The protective barrier provided by these coatings ensures that the heat exchanger withstands harsh conditions and maintains its optimal functionality. Their entire manufacturing operations are carried out at their consolidated manufacturing facility comprising 2 industrial plots situated in the RIICO Industrial Area, Neemrana, Rajasthan. 

The Company has a wide customer base covering various parts of India as well as across the world. Their prestigious customers, including Daikin Air conditioning India Private Limited, Schnieder Electric IT Business India Private Limited, Kirloskar Chillers Private Limited, Blue Star Limited, Climaventa Climate Technologies Private Limited and Frigel Intelligent Cooling Systems India Private Limited among others, attest to their commitment to delivering top-notch products and outstanding services.

HEAT EXCHANGER
Heat exchangers transfer thermal energy from one fluid to another, while ensuring that the fluids do not mix. This process is facilitated by conduction, enabling the heat exchanger to heat or cool a substance. Heat exchangers provide a means of regulating temperature, enhancing efficiency, averting overheating, and mitigating other potential hazards, resulting in an improvement in safety standards. Heat exchangers are considered more efficient and reliable in operations wherein some parameters, like temperature differential, flow rate and installation guidelines, are evaluated successfully. 

Being an efficient source of energy saving, heat exchangers find applications across a broad range of domestic and industrial applications such as steam power plants, chemical processing plants, food processing, HVAC systems, mining, pulp & paper, metallurgy etc. Heat exchangers typically are suitable for deployment in areas which have ample spaces such as industrial complexes, commercial space, hospitals, educational institutes etc. These systems are not generally preferred or feasible for smaller capacities, especially residential, as the economies of scale are difficult to overcome.

Indian Heat Exchanger Industry
The Indian market for heat exchanges reached USD 689 million per annum in 2023, the annual industry turnover increasing by a CAGR of 10% between 2019 and 2023. The heat exchanger industry too was impacted by the spread of the Covid-19 pandemic, as annual revenue growth in the industry slowed to 6% in 2020. Demand has recovered in the subsequent years, helping the industry grow its revenue by an average of 11% per annum in 2021, 2022 and 2023.

The demand for heat exchangers has been accelerated by rapid industrialization, urbanization, and a strong push for infrastructure development. These factors have contributed to significant annual revenue growth in the industry. The widespread application of heat exchangers across major industry segments ensures that increased industrial activity and positive economic sentiment directly boost demand for the product.

Beyond these direct demand drivers, the growing emphasis on efficient energy usage to reduce carbon emissions is emerging as a crucial indirect driver. Heat exchangers, with their ability to facilitate efficient heat transfer, play a key role in optimizing energy consumption. Given the predominant reliance on hydrocarbon energy sources, improvements in energy efficiency directly contribute to lower carbon emissions. As a result, heat exchangers are poised to play a vital role in India’s journey towards sustainable development.

Finned Tube Heat Exchanger
Finned tube heat exchanger is the second largest product segment in the Indian heat exchanger market, accounting for nearly one fifth of the overall industry revenue. In 2023, finned tube heat exchanger segment realized an annual revenue of USD 146 million, increasing by a CAGR of nearly 10.7% between 2020 and 2023. The increasing demand for energy efficient cooling applications is one of the key factors that is driving the demand for finned tube heat exchanger. Moreover, the compact nature of finned tube heat exchanger is also an added advantage – because of the lower space requirement and lower cost, when compared to other product types.

Copper finned tubes are the preferred material used in finned tube heat exchangers that are used for heat exchanger applications like condensers, evaporators, chillers, oil coolers etc – mainly for all kind of cooling & heating applications. The preference for copper material is because of its superior heat transfer rate, resulting in faster cooling. 

Heating, Ventilation, air conditioning (HVAC) and refrigeration are the key end use applications that are driving the demand for finned tube heat exchangers in Indian market. In refrigeration applications, heat exchangers are used as condensers or evaporators, with finned tube and plate heat exchangers finding usage. Finned tube heat exchangers are the most commonly used heat exchangers in HVAC systems, where it is used to exchange heat between air and the refrigerant / coolant. In addition, shell & tube type heat exchangers and tube-in-tube heat exchangers also find application in HVAC segment.

Heat Exchanger Usage in HVAC Systems
Heat exchangers are an integral part of the refrigeration cycle in a HVAC system. Heat exchangers, being a cold source of the central refrigeration system, can be used on the heat condenser cycle or in the evaporation refrigeration cycle. Typically, a refrigerant system comprises of one compressor, one condenser, one expansion valve and one evaporator: wherein the condenser and evaporator both act as heat exchangers. In the evaporator the refrigerant absorbs the heat of the water, so that it remains chilled. On the other hand, in the condenser the refrigerant rejects that heat and the compressor heat to other media which is usually air or water.

The efficiency of the whole system can be increased by integrating heat exchangers with other refrigeration equipment. For example, reducing energy consumption of condensers by feeding the condensers with refrigerating fluids and gasses reduced in temperature. 

Applications of heat exchangers for refrigeration can be found across diverse sectors wherever cooling or heating of different mediums such as water, coolant, gases and ammonia is required. For example, in the food industry heat exchangers are generally used for preserving the quality and for sanitizing processes. They are used to heat water to sterilize food or increase their temperature to decontaminate them or improve the longevity by quick freezing process. In the metallurgical industry, heat exchangers are used for optimizing the processes related to change in water temperature as it is used to cool the water metal molds and presses which release high levels of heat. 

The Indian refrigeration equipment market is undergoing rapid development on the back of increasing household income, lower penetration, rapid urbanization and gradual shift towards nuclear families among others. It is further supported by introduction of innovative models and easy availability of consumer financing for home appliances. Advanced technology related to frost free, inverters, energy saving capabilities etc. is playing an important role in the purchasing decision of the consumer. Presence of well-established domestic and international players have led to intense competition leading to a wide range of options for the consumer. Further, the convenience of buying has become easier with heavy discounts and festive offers on e-commerce platforms.

Indian HVAC Market
Indian HVAC market generated an annual turnover of approximately USD 9.1 billion in 2023 and it is expected to grow by a CAGR of 14.5% till 2029 to reach USD 20.5 billion. Traditionally, commercial, and industrial applications used to lead the HVAC industry in the country. However, beginning 2000 the usage of HVAC system in residential segment, and mobile / transport application has started becoming mainstream. Substantial increase in income levels and aspirational changes drove HVAC demand in residential / retail consumer segment. Meanwhile in traditional industrial and commercial segments, the rapid expansion in office space as well as industrialization ensured the demand for HVAC remain strong.

The HVAC market in India experienced a shift towards energy-efficient systems, driven by rising energy costs and environmental concerns. The government's initiatives to promote energy efficiency, such asthe Energy Conservation Building Code (ECBC) and the Standards and Labelling (S&L) program, played a crucial role in driving the adoption of energy-efficient HVAC systems. 

Additionally, there is a growing awareness of indoor air quality and the need for improved ventilation and air purification, leading to increased demand for HVAC systems that can address these concerns. The industry is witnessing a shift towards technologically advanced HVAC solutions, including smart controls, remote monitoring, and energy management systems, providing enhanced comfort and energy efficiency. 

The sectors that employ HVAC systems most in India include commercial buildings, hospitals, hospitality (hotels and restaurants), retail spaces, educational institutions, and industrial facilities. These sectors require efficient HVAC systems to maintain comfortable and healthy indoor environments for occupants. 

The Indian government's focus on infrastructure development, smart cities, and sustainable building practices further boosts the demand for HVAC systems. Initiatives like Make in India, promoting domestic manufacturing, have also contributed to the growth of the HVAC industry by encouraging local production and reducing dependency on imports.

The HVAC market in India is on a strong growth trajectory, fueled by rapid urbanization, rising disposable incomes, and the increasing need for energy-efficient solutions amidst changing climatic conditions. The shift towards smart HVAC systems is becoming a key trend, with consumers prioritizing intelligent solutions that offer enhanced controls, real-time monitoring, and IoT integration. This is further amplified by technological advancements, such as variable refrigerant flow (VRF) systems and predictive maintenance driven by machine learning, which are enhancing energy efficiency, reducing operational costs, and contributing to sustainability in both residential and commercial segments. 

Government initiatives like the ‘Make in India’ campaign, Atmanirbhar Bharat, and Production Linked Incentive (PLI) schemes are bolstering local manufacturing, reducing import dependency, and supporting the nation's goal of achieving carbon neutrality by 2070. Moreover, the significant government investment of USD 1.45 trillion in infrastructure over the next five years is expected to drive unprecedented growth in the sector. The projected increase in the number of Indian cities with populations exceeding one million by 2030, alongside the anticipated construction boom, underscores the vast potential for the HVAC market. The growing emphasis on green building certifications like LEED and GRIHA further creates opportunities for the adoption of energy-efficient HVAC systems. Additionally, the rise of aftermarket services, including maintenance, retrofitting, and upgrades, presents new avenues for HVAC service providers and contractors, making the Indian HVAC market a compelling landscape for both local and international players.

The rapid expansion of infrastructure in India, including the construction of 80 new airports and the significant growth in office spaces, shopping malls, and hotels, is set to dramatically increase the demand for HVAC systems. This surge in infrastructure projects, driven by key investments from major players like DLF, Parikh, Blackstone, Lulu Group, and ITC, underscores the growing need for advanced MEP (Mechanical, Electrical, and Plumbing) systems. Mega projects such as the 1 million square feet office space for Standard Chartered, the DLF Downtown project in Chennai, and the 2.5 million square feet mall in Gurugram are just a few examples highlighting this trend.

Moreover, with the Government of India's commitment to investing INR 6,209.2 Crores for airport infrastructure development by 2030, the demand for HVAC systems is poised to grow substantially. India’s 131 operational airports, along with the planned additions, will require extensive HVAC systems to meet the increasing air travel demand, thereby boosting the market for essential components like heat exchangers. As these systems are crucial for efficient heating, cooling, and ventilation, the ongoing and future infrastructure developments in the commercial and airport sectors will be pivotal in driving the HVAC market forward in India.

Building sector is the key demand driver for HVAC systems, with adoption level spread across residential, commercials, industrial and infrastructure sub sectors. Apart from ensuring comfortable conditions, HVAC usage is also gaining traction because of the need to improve energy efficiency. Thus, a growth in building stock - backed by regular addition of new building - plays a direct role in promoting the demand for HVAC system. At present buildings account for approximately 20% of energy usage in India, with the share as high as 31% in commercial buildings. With Indian Government promoting efficient energy usage, the need for installing HVAC system that optimise energy usage has become important now. Against this rising demand, the current penetration of HVAC system in Indian building sector is less than 5%. 

Such a low penetration of HVAC system in Indian building segment, along with pressing need to optimize energy usage in building sector points towards an aggressive growth in HVAC adoption in the coming years. It is this scenario that has promoted many industry players and associationsto paint an optimistic growth forecast - with several stake holders predicting a compounded growth rate in the range of anywhere between 15 to 30% during this decade. This optimistic demand scenario bodes well for finned tube heat exchanger, which is the most prominent heat exchanger used by the HVAC industry.

In a manufacturing plant, HVAC system is used for controlling humidity, temperature, and air quality – for improving the working condition of employees as well as maintaining the optimum ecosystem that supports the manufacturing process (especially in industries like pharmaceuticals etc). Industrial air conditioning is most crucial in sectors like pharmaceuticals, food & beverage, electronic manufacturing, and medical equipment manufacturing. 

The capex growth in manufacturing – which indicates the new projects coming up in the space – is a key indicator of HVAC demand emerging from manufacturing sector. In 2023, nearly 660 projects were completed in manufacturing sector – ranging from setting up pharmaceutical plants to agriculture machinery manufacturing unit. Of these Pharmaceuticals and chemicals – two of the sectors where HVAC deployment is crucial – accounted for nearly 36% (approximately 175) projects. Such a strong capacity addition in pharmaceutical and chemical manufacturing space have benefitted the HVAC industry.

Approximately 1,100 new projects have been announced in the manufacturing sector with nearly 390 - 400 projects coming up in chemical manufacturing, drugs & pharmaceuticals and food & beverage space alone. All these projects were announced in 2023, and its execution is expected to happen in the coming years. These upcoming projects is an indication of new capacity (in the form of brownfield & greenfield facilities) coming up in manufacturing space. Since setting up of a new space is accompanied by the deployment of HVAC, the strong project pipeline indicates a stable growth demand forecast for HVAC system from industrial segment.

Indian manufacturing landscape is witnessing a rapid transformation, especially on the infrastructure front. Through a series of policy measures – like Make in India, and Production Linked Incentive (PLI) scheme – Indian Government is attractive corporate sector to set up manufacturing facilities in India. The attractive regulatory policy measures are designed to attract both domestic and multinational industrialists. As these policy measures gains traction, there would be a commensurate increase in the number of new manufacturing plants coming up in the country, which bodes well for HVAC demand emerging from industrial segment. 

Hence, apart from existing pipeline of new projects, supportive policy measures like Make in India, and PLI scheme is expected to enrich the new project pipeline. This would translate into a stable long-term demand for HVAC systems from industrial segment.

KRN HEAT EXCHANGER ANF REFRIGERATOR LIMITED COMPETITIVE STRENGTHS
1. Promoters exhibit strong leadership and are supported by highly experienced senior management.
2. Long‐standing business relationships with leading clientele
3. Effective quality control checks
4. Consistent financial performance
5. Established Manufacturing facility

KRN HEAT EXCHANGER ANF REFRIGERATOR LIMITED STRATEGIES
1. Expanding their customer base
2. Focus on increasing operational efficiencies to improve returns.
3. Enhancing existing products base and product quality
4. Regular Improvement in product design and development
5. Increasing their global footprint and augmenting growth in current geographies

KRN HEAT EXCHANGER ANF REFRIGERATOR LIMITED RISK FACTORS & CONCERNS
1. They are dependent on and derive 33.34%, 32.85% and 32.28% of their revenue for the Financial Year 2024, 2023 and 2022 from their single customer namely Daikin Air conditioning India Private Limited.
2. They rely heavily for their raw materials from their vendors in Malaysia, South Korea, Thailand, Vietnam and China and in Financial Year 2024, 2023 and 2022.
3. If their top 10 customers engaged in refrigeration and air conditioning (RAC) Industry starts manufacturing Heat Exchangers in-house, or if there is a downward trend in Industry, their sales could be adversely affected.
4. The cost of production is exposed to fluctuations in the prices of raw material particularly Aluminium Foil, Copper Foils, Galvanize Sheet, Copper Tubes and Copper and Aluminum Sheet and Stainless Steel.
5. Any surplus holding of highly volatile and price sensitive raw materials such as copper tubes, copper rods and aluminium foil on account of inaccurate forecasting of customer orders and failure to manage raw material inventory could adversely affect their business, results of operations and financial condition.
6. On April 07, 2023, the Company incorporated wholly owned subsidiary company named KRN HVAC Products Private Limited.
7. They are highly dependent on the HVAC industry and any unfavorable effect on HVAC industry will adversely affect their revenue generation and future growth possibilities.
8. The emerging trends in the Indian heat exchangers industry, such as hybrid heat exchangers, better energy efficient models, smart heat exchangers, modular heat exchanger and usage of new alloys and composites materials, may pose some challenges which could affect their Company’s operations and financial condition.
9. They regularly work with hazardous materials such as LPG gas and Oxygen gas which could be flammable and activities in their manufacturing facilities can be dangerous.