How KRN Heat Exchanger Is Preparing To Benefit From India's Rs 5 Lakh Crore Data Center Boom

The data center story in India is unfolding faster than most had expected. Bernstein notes that the sector saw $63 billion (over Rs 5 lakh crore) in announced investments in 2025, with commitments from Reliance, Google, Adani Connex, Amazon Web Services, and TCS. Capacity expansion has kept pace with this investment cycle.

Jefferies estimates data center revenue to rise fivefold, from $1.5 billion in FY25 to nearly $8.0 billion by FY30, as installed capacity scales up from 1.6 gigawatt (GW) to 8.0 GW. But beyond these numbers lies a more fundamental reality.

Every rack of servers generates heat, which is expected to increase as data center capacity grows. Heat generation is set to rise further as data center capacity continues to expand. But this challenge is not limited to data centers alone.

Heat Is Not a Data-Center Problem Alone

Almost every industry deals with heat, from air conditioners to power plants and heavy industrial facilities. Across these applications, Heat Exchangers sits at the core of thermal management. It prevent overheating and improve energy efficiency by regulating temperature, humidity, and air purity.

Hvac Emerges As The Key Demand Driver

HVAC (heating, ventilation, and air conditioning) is driving the demand for heat exchangers in India. The Indian heat exchanger sector is projected to grow at an annual rate of 9% to reach $1.8 billion by 2032, while the global market is expected to increase from $18.9 billion in 2024 to $33 billion by 2033.

Rapid urbanisation, renewable energy, data centers, and industrialisation are expected to remain key demand drivers over the medium term.

Four Segments Define The Heat Exchanger Market

There are four types of Heat Exchangers. Shell-and-tube exchangers dominate oil, gas, and chemical applications account for 53% of India's market. Finned tube exchangers used in HVAC and refrigeration systems account for 21%.

Plate exchangers account for 20%, and spiral exchangers account for the remaining 6%. Chemicals, oil and gas, and power and energy make up 56.8% of the end-user market, with HVAC accounting for 14.9% and metals for 8.2%.

Where KRN Fits Into This Demand Cycle

This is where KRN Heat Exchanger fits in. Its core business is aligned with the fast-growing commercial HVAC segment, which the company believes is growing at 20-25%. KRN products serves critical roles in process cooling, data center and industrial refrigeration. It is also aggressively positioning itself in high-value specific sub-sectors.

KRN offers six core product categories. Its product portfolio includes condenser coils, evaporator coils, headers and copper parts, fluid and steam coils, and sheet metal components. In FY25, condenser coils accounted for 60.7% of revenue, while evaporator coils (30.4%).

These products are supplied to Original Equipment Manufacturers (OEMs) across diverse HVAC applications, including air conditioning, refrigeration, and process cooling systems. The company served 132 customers in FY25, with its top 10 customers accounting for 73.2% of its revenue. Its clientele includes well-known OEMs like Daikin, Schneider Electric, Blue Star, and Voltas.

Data Center Cooling Offers A Structural Edge

KRN has a competitive advantage in data center cooling due to its ability to manufacture extremely large heat exchangers required for hyperscale data centers, a capability that many competitors lack. KRN estimates that the heat exchangers required for Google's planned data center in Visakhapatnam will cost Rs 1,500 crore, and the company is aiming to capture a 50% market share.

Expanding Beyond Stationary HVAC

KRN has also expanded into Automotive and Transport HVAC through the acquisition of a bus air-conditioning division. This provides ready technology and an experienced team to address the Rs 1,000 crore bus AC market. Management views this as a stepping stone, with plans to bid for HVAC projects with Indian Railways and Metro systems after gaining operating experience across 500 buses.

To expand its total addressable market, KRN is also moving beyond its traditional portfolio by introducing bar-and-plate heat exchangers and roll-bond evaporators. KRN distinguishes itself through its backward integration, manufacturing many of its components in-house, including headers, copper parts, and sheet metal.

Its in-house testing capabilities further strengthen its position, enabling prototyping and performance validation for major clients such as Daikin, Blue Star, and Schneider Electric.

Scaling Up Capacity, Nearly 6x In One Cycle

To capitalise on the growing demand, KRN has already increased its previous annual capacity of 1 million units by almost six times. This expansion was necessary as its existing capacity was already operating at peak levels. Management aims to achieve 20% capacity utilisation at this new facility in FY26 and increase it to 50% in FY27.

Beyond India, KRN exports to more than 14 countries, with the UAE (47.4%), USA (20%), Italy (11.1%), and Canada (18.9%) as key markets. Export revenue currently stands at 15.6% (H1 FY26), and management aims to raise this to 50% over the next three years, driven by higher commercial HVAC demand in North America and Europe.

Financial Performance Remains On An Uptrend

KRN’s financials reflect this expansion. Revenue increased 74% year-on-year to Rs 430 crore in FY25 from Rs 247 crore in FY23. EBITDA rose 44% to Rs 70.5 crore, though margins declined 340 basis points to 16.4% due to higher employee costs. Net profit grew 57% to Rs 53 crore.

The momentum continued in H1 FY26. Revenue rose 43% year-on-year to Rs 267 crore. EBITDA increased 34% to Rs 47.8 crore, and margins moderated by 130 bps to 17.9%. Margins remained relatively stable despite higher copper and aluminium prices, as the company passes raw material costs to customers with a one-quarter lag. Net profit grew 25% to Rs 30.4 crore.

Management believes an EBITDA margin of 20% is sustainable over the medium term. It expects PAT 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 its new facility. At Rs 716 per share, KRN trades at 75x price-to-earnings multiple, with RoCE of 12.4% and RoE of 10.6%.

Key Risks To Monitor

Import dependence for raw materials exposes the company to potential supply chain disruptions, which could impact availability and input costs. Higher inventory holding has also led to sub-optimal utilisation of resources, tying up working capital.

In addition, the company’s reliance on a limited set of large customers increases exposure to the risk of insourcing, if key customers choose to manufacture heat exchangers in-house.