KRN

: Import Substitution + Data Centre Boom = Multi‑Year Runway

While HVAC brands fight for consumer mindshare, the real bottleneck lies upstream—in heat exchangers.

with a six‑fold capacity expansion and a diversified product roadmap, is positioned to capture this supply‑tight, multi‑year opportunity. Execution risk remains, but the company’s balance sheet strength, policy tailwinds, and expanding end‑markets offer compelling visibility. Heat exchangers form the backbone of HVAC systems, a ₹7,100‑crore domestic market growing at 14.5% CAGR. Data centres alone allocate 40% of server capex to cooling and power infrastructure. With ₹1.6 lakh crore committed to data‑centre capex over five years, precision cooling demand is set to surge. Rising electrification, EV thermal management, and extreme heat amplify this structural shift. The Neemrana greenfield plant (₹350 crore capex) began operations in May 2025, increasing capacity six‑fold. Peak revenue potential now stands at ~₹2,000 crore. Utilisation is expected to scale from 20–25% in FY26 to 85–95% by FY28, as OEM onboarding accelerates. No major capex is planned in FY26, reducing balance‑sheet strain. The new facility enables KRN to move beyond coils into Bar & Plate exchangers, Microchannel units, and Oil Cooling Systems—critical for data centres, EVs, and industrial cooling. This shift improves mix quality and reduces dependence on Daikin. Export revenue is targeted to rise from 15% to 50% over two years, with North America and Europe as key markets. The acquisition of Sphere Refrigeration’s Bus AC division opens a ₹1,000‑crore market growing at 20–25%. Margins here are slightly superior to the core business. Railways vendor approval adds another long‑cycle, high‑volume opportunity. KRN is eligible for ₹141.7 crore PLI incentives, RIPS benefits, and a 17.16% concessional tax rate at the new plant. These levers offset near‑term operating deleverage and support margin expansion as utilisation ramps.