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The initial public offering (IPO) of KRN Heat Exchanger, a manufacturer of fin and tube-type heat exchangers, witnessed a significant surge in investor interest on its first day of opening. The IPO, which opened for bidding on September 25th, was fully subscribed within a mere 14 minutes, indicating strong demand from both retail and institutional investors. The IPO received a total subscription of 11.45 times the offered shares, with the retail category alone subscribing 12.32 times and the Non-Institutional Investor (NII) segment exceeding expectations at over 24 times the offered shares.
The IPO price band for KRN Heat Exchanger was set between Rs 209-220 per share, with the company aiming to raise Rs 342 crore through the sale of 1.55 crore fresh shares. The allotment of shares is expected to be finalized by September 30th, with the listing scheduled for October 3rd on both the Bombay Stock Exchange (BSE) and the National Stock Exchange of India (NSE). Retail investors could bid for as little as one lot, comprising 65 shares at a cost of Rs 14,300.
The strong subscription levels and the significant grey market premium (GMP) reflect investor confidence in the company’s future prospects. The grey market, an unregulated market for trading shares illegally, showed a premium of 108% for KRN Heat Exchanger shares, indicating strong demand and a positive sentiment towards the IPO. A premium exceeding 100% is often considered a strong indicator of investor interest and a potential for profitable returns.
KRN Heat Exchanger specializes in the manufacturing of copper and aluminium fins, copper tube heat exchangers, water coils, condenser coils, and evaporator coils, catering to the domestic, commercial, and industrial heating, ventilation, air conditioning, and refrigeration (HVAC&R) industry. The company’s success is driven by its strong track record, its dominant position in the HVAC&R market, and its focus on innovation and quality.
Despite the positive outlook, the company has identified certain key risks in its DRHP (Draft Red Herring Prospectus) that potential investors should consider. One of the most significant concerns is the company’s reliance on a limited number of customers, with over 30% of its revenue coming from a single customer – Daikin Airconditioning India. The dependence on such a small number of customers poses a risk as any delay or cancellation of orders could have a substantial impact on the company’s business.
The company has also acknowledged concerns about its revenue growth. While its revenue from operations has been increasing at a compound annual growth rate (CAGR) of 25.46% over the past three years, sustaining this growth rate in the future is not guaranteed. A failure to maintain this growth rate could negatively impact business operations and profitability. Similarly, the company’s profit after tax (PAT) has been rising at a CAGR of 54.52% over the past three years, but sustaining this level of growth might be a challenge, posing a potential concern for investors.
Source: KRN Heat Exchanger IPO Day 1: Check GMP, Subscription Details, Allotment Status