KRN Heat Exchanger Limited - IPO

1. Its revenue from operations has significantly increased from Rs.15,611.46 Lakhs in FY 2021-22 to Rs.24,748.08 Lakhs in FY 2022-23 resulting in growth of o ver 58% (YOY). Similarly, its revenue from operations has further increased from Rs. 24,748.08 Lakhs in FY 2022-23 to Rs. 30,828.31 Lakhs in FY 2023-24 leading to growth of 24% (YOY). Its revenue from operations from last three Financial Years are increasing by Compounded Annual Growth Rate (CAGR) of 25.46%. If the company is unable to sustain or manage its growth rate its business operations and results of operations may be adversely affected, and this rate of growth may not be achievable in the future.

2. Its Profit after Tax ("PAT") has significantly increased from Rs.1,059.04 Lakhs in FY 2021-22 to Rs.3,231.35 Lakhs in FY 2022-23 resulting in growth of over 205.12% (YOY). Similarly, our PAT has further increased from Rs.3231.35 Lakhs in FY 2022-23 to Rs.3906.86 Lakhs in FY 2023-24 leading to growth of 20.90% (YOY). Its PAT from the last three financial years is increasing by CAGR of 54.52%. If the company is unable to maintain these profit margins in future, its financial condition may be adversely affected.

3. The company is dependent on and derive 33.34%, 32.85% and 32.28% of its revenue for the Financial Year 2024, 2023 and 2022 from its single customer namely Daikin Airconditioning India Private Limited and further the company derives 72.31%, 70.87% and 75.82% of its revenue from the company top 10 key customers for the Financial Year 2024, 2023 and 2022 respectively. Delay or Cancellation of orders by any one or all of its top customers could have a material and adverse effect on its business, results of operations and financial condition.

4. The company does not have any long-term agreements with any of its customers. If its customers choose not to source their requirements from the company, it would lead to financial instability and operational uncertainty and its business and financial conditions may be adversely affected.

5. The company relies on limited number of suppliers and procure 14.94%, 17.29% and 17.46% of its raw materials for the Financial Year 2024, 2023 and 2022 from its largest supplier and further the company procure 57.73%, 57.98% and 52.38% of its raw materials from the company Top 5 suppliers and 77.99%, 78.48% and 70.07% of its raw material from its top 10 key suppliers for the Financial Year 2024, 2023 and 2022 respectively. Any delay in the supply of its raw materials by these suppliers may adversely affect the results of operations and financial condition.

6. The company does not have any long-term contracts with any of its suppliers. Further the company is heavily dependent on overseas suppliers to ensure quality supplies to it as per the company quality specifications. Any shortfall in the supply of its raw materials as per the company specifications or an increase in its raw material costs or other input costs or any country specific challenges may adversely affect the pricing and supply of its products and have an adverse effect on the company's business, results of operations and financial condition.

7. The company relies heavily for its raw materials from its vendors in Malaysia, South Korea, Thailand, Vietnam and China and in Financial Year 2024, 2023 and 2022, its import purchases accounted for 78.17%, 79.08% and 72.16% of the company total raw materials purchased. Any country-related risk or any change in Government policies in relation to import of goods or import of goods from any specific country or region may adversely affect the sourcing of its raw materials which may have an adverse effect on the company's business, operations and financial condition.

8. The company is required to obtain, renew or maintain certain statutory and regulatory permits and approvals required to operate its business and if the company fails to do so in a timely manner or at all and its business, financial conditions, results of operations and cash flows may be adversely affected.

9. Its inability to collect receivables from the company customers or default in payment by them could result in the reduction of its profits and affect its cash flows. The company inability to collect receivables from its customers or default in payment by them could result in the reduction of its profits and affect the company cash flows.

10. Its inventory holding is Rs.8,440.52, Rs. 5,508.43 and Rs. 2,130.85 for the Financial Year ended on March 31, 2024, 2023 and 2022 which tantamount to 37.02%, 29.99% and 16.42% of its Cost of Goods Sold. Such continuous increase has led to sub optimal utilization of resources. If the company fails to manage the Inventory and forecast the demand its business operations and financial conditions may be adversely affected.