KRN Heat Exchanger and Refrigeration Limited — Q4 FY25 earnings call

Call held 20 May 2025

Management summary

KRN Heat Exchanger reported strong revenue and profit growth for Q4 and full year FY25, driven by expanded capabilities and strategic breakthroughs. Key achievements include PLI scheme approval, Indian Railways vendor recognition, and significant export growth. While Q4 margins saw some pressure, management remains confident in long-term expansion supported by R&D, automation, and increasing export share.

Highlights

  • Consolidated Q4 FY25 Revenue grew 62.3% YoY to INR 135.83 crores.

  • Consolidated Q4 FY25 Net Profit increased 23.44% YoY to INR 14.87 crores.

  • Full Year FY25 Consolidated Revenue reached INR 441.71 crores, up 40.79% YoY.

  • Full Year FY25 Consolidated Net Profit was INR 52.88 crores, a growth of 34.25% YoY.

  • The company received approval for the PLI scheme for white goods, with a sanctioned financial incentive of INR 141.72 crores.

  • KRN HVAC Products Pvt. Ltd. was approved as a vendor by the Ministry of Indian Railways for oil cooler radiators, with margins almost double existing products.

  • Export revenue grew nearly 49% YoY, now contributing 16% of consolidated revenue, with a target to increase this to 30%-35% by FY26.

  • EBITDA margin for Q4 FY25 faced pressure, down around 1.7% QoQ due to seasonal sales, raw material sales to OEMs at lower margins, and increased employee costs.

Key financials

2 periods

Q4 FY25

  • Consolidated Revenue
    ₹135.83 Cr
    YoY +62.3%
  • Consolidated EBITDA
    ₹18.89 Cr
    YoY +7.5%
  • Consolidated Net Profit
    ₹14.87 Cr
    YoY +23.4%

FY25

  • Consolidated Revenue
    ₹441.71 Cr
    YoY +40.8%
  • Consolidated EBITDA
    ₹70.54 Cr
    YoY +20.6%
  • Consolidated Net Profit
    ₹52.88 Cr
    YoY +34.3%

What they filed

Q1 FY27: revenue up 59.6%, net profit up 18.8% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue99 104 131 114 223 +125%136 +31%202 +54%182 +60%
EBITDA18 16 20 20 30 +67%17 +6%18 −10%25 +25%
Net profit12 13 14 16 24 +100%15 +15%17 +21%19 +19%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Share of Revenue
₹429.9 Cr Total
  • Domestic Business (FY25 Standalone) ₹362.4 Cr 84.3%
  • Overseas Revenue (FY25 Consolidated) ₹67.5 Cr 15.7%

Guidance & targets

Market Share

  • Export Share of Consolidated Revenue Market Share · FY26 · Medium confidence 30%-35%
    Our export grew nearly 49% year-on-year, and now contributes 16% of consolidated revenue, again led by the transaction in the EU and Canadian markets. We are aiming to increase this share to 30%-35% by FY26.

    — Sonu Gupta, Chief Financial Officer

Profitability

  • PLI Scheme Benefit (Years 1-3) Profitability · next 3 years · High confidence 6%, 5%, 4%
    earlier policy they have like that 6%, then 5% and then 4%. So, we can get the incentive in next three years in terms of these percentage for top line.

    — Management

  • PLI Scheme Benefit (Years 4-13) Profitability · next 10 years · High confidence 1.56%
    This PLI for next 3 years and RIPS for the next 10 years. ... Yes, it is precisely 1.56%. Okay.

    — Management

  • Oil Cooler Radiator Margins (Indian Railways) Profitability · High confidence almost double existing products
    Yes. So, it's almost double compared to our existing product.

    — Management

  • Standalone EBITDA Margin Profitability · next quarter · Medium confidence remain same or slightly up
    So, now that if we talk about the standalone, so this our margin will remain same or slightly up if we compare to this last quarter.

    — Management

  • Consolidated EBITDA Margin Profitability · next 1-2 quarters · Medium confidence pressure for 1-2 quarters, then same as standalone
    And about console, of course, this again three to like one or two quarters, there will be some more pressure because of initial cost will be high, like overhead and the production will be less. But from like quarter or third, we will be on the same condition as our standalone.

    — Management

Revenue

  • Refrigeration Facility Revenue Revenue · next three years · Medium confidence INR 450 crores
    So, that top line, what you said, we can achieve in next three years.

    — Management

  • Railway/Metro Segment Growth Revenue · next 2 years · Medium confidence 10%-15%
    But we are expecting maybe 10% to 15% growth on existing business not much, because there were not much percentage of our total business to that segment.

    — Management

Capacity

  • New Facility Capacity Utilization Capacity · FY26 · Medium confidence 20%-25%
    So, this year we are targeting around 20% to 25% of utilization from new facility.

    — Management

Working Capital

  • Working Capital Days Working Capital · FY26 · Medium confidence 115-120 days
    So, the number of days would be around 115 to 120 days? Yes, it is around like that. As of now, its around 100 plus.

    — Management

Risks & concerns

  • EBITDA Margin Pressure

    medium

    Q4 FY25 EBITDA margin was down around 1.7% QoQ due to seasonal sales, lower-margin raw material sales to OEMs, and increased employee costs. Consolidated margins are expected to face pressure for 1-2 more quarters due to initial costs of new facilities.

    Management acknowledged

  • Data Inconsistency

    medium

    An analyst highlighted a discrepancy in US revenue figures between 9M FY25 (INR 6 crores) and full year FY25 (less than INR 1 crore), which management could not explain and stated they needed to check.

    Analyst not addressed

  • Working Capital Intensity

    medium

    Working capital days are currently around 100+ and are expected to be around 115-120 days, partly due to increased inventory from importing components and BIS implementation difficulties.

    Management acknowledged

  • Project Execution Delays

    low

    Commissioning of new production facilities and sample approvals for Indian Railways are taking 2-3 weeks longer than anticipated, but management expects to start production before the next quarter.

    Management acknowledged

Areas of evasion (2)

  • Q4 FY25 YoY EBITDA margin comparison
  • US market revenue discrepancy

Q&A highlights

1 direct, 1 evasive
EBITDA Margin Pressure in Q4 FY25 Partial
No, I think you are like maybe compared with that Q4, '24 to Q4, '25, right? ... Okay, that I think compared, we don't have. ... Maybe I am discussing for Q3 to Q4 actually.

Analyst highlighted a significant 7% YoY drop in Q4 EBITDA margin (21.4% in Q4 FY24 to 14.4% in Q4 FY25), which management struggled to address directly, instead focusing on QoQ comparison or stating they didn't have the data readily available.

Asked by Shivkumar Prajapati

Discrepancy in US Market Revenue Figures Evasive
No, I am unable to understand. Can you repeat again your question? ... So, maybe there is some correction need, I think to check. But we added one customer from, like Canada as well. So, we received some good business. However, this data, I think need to check. I am not sure. ... So, we have to check and then come back to you again. Okay.

Analyst pointed out a significant discrepancy in reported US revenue (INR 6 crores for 9M FY25 vs. less than INR 1 crore for full year FY25), which management could not explain and promised to check later, indicating a potential data reporting issue.

Asked by Heta from Monarch AIF

Impact of UK FTA and US-China Tariffs on Business Direct
So, UK, actually we have some customer, like a small customer already we have in our portfolio. However, one big customer we are going for discussion. So, of course, they will have some maybe advantage if they will take from us. ... As of now, we don't have any impact. ... I think whatever percentage they will decide, I think it will be compared to India. I think it will be maybe more compared to India. So, I think we will have benefit.

This question explored macro-economic and geopolitical factors, and management provided a clear, albeit cautious, view on potential benefits from trade deals and tariffs, indicating a positive outlook for India-based manufacturing.

Asked by Shivkumar Prajapati

3 min read 6 chapters

Detailed narrative

Robust Q4 and Full Year FY25 Financial Performance

KRN Heat Exchanger reported strong financial results for Q4 FY25 and the full fiscal year. Consolidated revenue for Q4 FY25 grew 62.3% year-on-year to INR 135.83 crores, with net profit increasing 23.44% to INR 14.87 crores. For the full year FY25, consolidated revenue reached INR 441.71 crores, a 40.79% increase, and net profit stood at INR 52.88 crores, up 34.25% from the previous year. Domestic business contributed approximately 84% of total revenue at INR 362.4 crores, growing 49% YoY.

Strategic Breakthroughs: PLI Scheme and Indian Railways Vendor Approval

A significant highlight was the approval under the Government of India's Product Linked Incentive (PLI) scheme for white goods, sanctioning a financial incentive of INR 141.72 crores. Management detailed PLI benefits as 6%, 5%, and 4% for the next three years, followed by 1.56% for the subsequent ten years. Additionally, KRN HVAC Products Pvt. Ltd. received official recognition as a vendor by the Ministry of Indian Railways for oil cooler radiators, with management stating these orders offer 'almost double' the margins compared to existing products. The company has already delivered a 10-unit prototype order to Banaras Locomotive Works (BLW).

Export Growth and Market Diversification

Overseas revenue demonstrated strong performance, growing nearly 49% year-on-year to INR 67.5 crores and now contributing 16% to consolidated revenue. The company aims to significantly increase this share to 30%-35% by FY26, leveraging product pricing 20%-25% lower than EU peers and faster development cycles. Discussions are underway for a large customer in the UK, potentially benefiting from an FTA deal, and the company sees opportunities in the US market due to China-US trade tariffs.

EBITDA Margin Dynamics and Future Outlook

EBITDA for Q4 FY25 stood at INR 18.89 crores, with management noting a 1.7% decline compared to the previous quarter. This pressure was attributed to seasonal sales with lower margins, sales of raw materials to OEMs at reduced margins, and increased employee costs. While standalone margins are expected to remain stable or slightly improve, consolidated margins may face pressure for the next one to two quarters due to initial costs associated with new facilities before stabilizing.

Refrigeration Facility and R&D Expansion

KRN is establishing a new refrigeration facility, expected to generate INR 450 crores in revenue within the next three years, focusing on components like roll boundary operators, fin tubes, and wire-on-tube condensers. This facility, under a new subsidiary, is set to begin mass production from September 2025, targeting 20%-25% capacity utilization in FY26. The company also incorporated Thermotech Research Laboratories Pvt. Ltd., a wholly-owned subsidiary focused on HVAC testing and training, aligning with its R&D strategy and aiming to offer third-party certification.

Working Capital and Operational Efficiency

The company's working capital cycle is currently around 100+ days and is projected to be around 115-120 days for FY26. This is partly influenced by increased inventory due to component imports and challenges related to BIS implementation. To enhance operational efficiency, KRN successfully implemented the SAP ERP system (HANA Cloud version) on April 1st, which is expected to improve internal visibility and process control.

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