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.