KRN Heat Exchanger and Refrigeration Limited announced key strategic decisions following its board meeting held on January 12, 2026. The company approved significant loan modifications and introduced an employee stock option plan, demonstrating its commitment to subsidiary growth and employee retention.

Loan Agreement Modifications

The board approved substantial modifications to the existing loan agreement with KRN HVAC Products Private Limited, a wholly-owned subsidiary. The key changes involve converting the unsecured loan into a convertible facility, providing the lender with discretionary conversion rights.

The modification grants KRN Heat Exchanger the right to convert the outstanding loan amount, along with accrued interest, into fully paid-up equity shares of KRN HVAC at its sole discretion. The conversion will be based on valuation reports obtained by the borrower when conversion requests are made.

New Loan Facility Approved

The board sanctioned a fresh loan agreement with Thermotech Research Laboratory Private Limited, another wholly-owned subsidiary, to support its working capital requirements.

Employee Stock Option Plan 2026

The board approved the comprehensive KRN Employee Stock Option Plan 2026, subject to shareholder approval at the upcoming general meeting. The plan aims to reward employee performance and attract talented professionals to the organization.

The plan complies with SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021. The Nomination and Remuneration Committee will determine eligible employees and grant options in tranches. The exercise price may be adjusted for corporate actions such as rights issues, bonus issues, or stock splits.

Related Party Transactions

Both loan agreements constitute related party transactions conducted at arm's length basis. KRN HVAC Products Private Limited and Thermotech Research Laboratory Private Limited are wholly-owned subsidiaries, making them part of the promoter group companies. The transactions require appropriate regulatory disclosures under SEBI listing regulations.

The board meeting commenced at 3:35 PM and concluded at 4:00 PM on January 12, 2026, with all resolutions receiving necessary approvals.

India's data center sector is experiencing unprecedented growth, with ₹5 lakh crore in announced investments during 2025 from major players including Reliance, Google, Adani Connex, Amazon Web Services, and TCS. This massive expansion creates substantial opportunities for companies in the thermal management ecosystem, particularly heat exchanger manufacturers who provide critical cooling solutions for data centers.

Market Opportunity and Growth Drivers

The Indian heat exchanger sector is projected to grow at 9% annually to reach $1.80 billion by 2032, while the global market is expected to increase from $18.90 billion in 2024 to $33.00 billion by 2033. Data center revenue is estimated to rise fivefold, from $1.50 billion in FY25 to nearly $8.00 billion by FY30, as installed capacity scales from 1.60 gigawatt to 8.00 gigawatt.

HVAC applications account for 14.90% of the end-user market, while chemicals, oil and gas, and power and energy comprise 56.80% of total demand.

KRN's Strategic Market Position

KRN Heat Exchanger and Refrigeration has positioned itself strategically within the fast-growing commercial HVAC segment, which the company estimates is expanding at 20-25% annually. The company serves 132 customers, with its top 10 clients accounting for 73.20% of revenue, including established OEMs like Daikin, Schneider Electric, Blue Star, and Voltas.

KRN offers six core product categories, with condenser coils representing 60.70% of revenue and evaporator coils contributing 30.40% in FY25. The company's product portfolio includes:

• Condenser coils and evaporator coils
• Headers and copper parts
• Fluid and steam coils
• Sheet metal components
• Bar-and-plate heat exchangers
• Roll-bond evaporators

Data Center Cooling Competitive Advantage

KRN has developed a competitive edge in data center cooling through its capability to manufacture extremely large heat exchangers required for hyperscale data centers. The company estimates that heat exchangers for Google's planned data center in Visakhapatnam will cost ₹1,500.00 crore, with KRN targeting a 50% market share in this segment.

The company distinguishes itself through backward integration, manufacturing components in-house including headers, copper parts, and sheet metal. Its in-house testing capabilities enable prototyping and performance validation for major clients.

Capacity Expansion and Export Growth

To capitalize on growing demand, KRN has expanded its annual capacity from 1 million units to nearly 6 million units. Management targets 20% capacity utilization at the new facility in FY26, increasing to 50% in FY27.

Export revenue currently stands at 15.60% in H1 FY26, with management aiming to increase this to 50% over the next three years, driven by higher commercial HVAC demand in North America and Europe.

Financial Performance and Outlook

KRN's financial performance reflects its expansion strategy and market positioning:

In H1 FY26, momentum continued with revenue rising 43% year-on-year to ₹267.00 crore. EBITDA increased 34% to ₹47.80 crore, while margins moderated by 130 basis points to 17.90%. Net profit grew 25% to ₹30.40 crore.

Management believes an EBITDA margin of 20% is sustainable over the medium term, with PAT expected to improve by 1-1.5% over the next 2-3 years, supported by solar power savings, PLI incentives, and a lower 15% tax rate at the new facility.

Risk Factors and Market Challenges

Several risks require monitoring including import dependence for raw materials, which exposes the company to potential supply chain disruptions. Higher inventory holding has led to sub-optimal resource utilization, tying up working capital. The company's reliance on a limited set of large customers increases exposure to insourcing risk if key clients choose to manufacture heat exchangers in-house.

At ₹716.00 per share, KRN trades at 75x price-to-earnings multiple, with RoCE of 12.40% and RoE of 10.60%, reflecting investor confidence in the company's growth prospects within India's expanding data center ecosystem.