KRN Heat Exchanger and Refrigeration Ltd Management Discussions

ECONOMIC OVERVIEW

GLOBAL ECONOMY: FY 2024-25 At a Critical Crossroads

The global economy demonstrated considerable resilience in 2024, maintaining an annualised growth rate of 3.2% (CY 2024) 1 through the second half of the year. This performance reflects the adaptability of businesses and consumers in the face of higher interest rates, persistent supply chain realignments, and evolving geopolitical dynamics. Growth is forecast to ease only slightly to 3.1% in 2025 (CY) and 3.0% in 2026 (CY), signalling that the world economy is entering a phase of stable, sustainable expansion rather than sharp deceleration.

While global trade volumes have moderated due to higher trade barriers in several G20 economies, services trade and cross-border investment flows remain supportive of overall activity. The United States, after a period of exceptional growth momentum, is expected to normalise to 2.2% in 2025 (CY) and 1.6% in 2026 (CY) 1 . The Euro Area will continue to expand at a measured pace - 1.0% in 2025 (CY) 1 and 1.2% in 2026 (CY) 1 - as policy uncertainty and cautious consumer spending temper demand, but fiscal support and gradual recovery in industrial activity provide a floor to growth.

Inflation remains a focal point for policymakers. Services price inflation across OECD economies is still elevated, with a median of 3.6% (CY 2024), highlighting continued tightness in labour markets and robust wage growth in some sectors. Nevertheless, headline inflation in G20 economies is expected to fall from 3.8% in 2025 (CY) to 3.2% in 2026 (CY), aided by easing energy prices, improved supply conditions, and prudent monetary policy. Underlying inflation, while declining, is projected to remain marginally above central bank targets in several advanced and emerging economies in 2026, indicating that interest rate normalisation will likely remain gradual.

Despite these headwinds, global economic sentiment is supported by continued technological innovation, expanding renewable energy investments, and infrastructure modernisation in many emerging markets - all of which create a constructive backdrop for long-term growth.

INDIAN ECONOMY

Resilience Amid Global Headwinds

India continues to stand out as one of the most dynamic large economies globally. While growth momentum eased slightly at the start of 2025, following a healthy recovery in the last quarter of 2024, the medium-term trajectory remains robust. GDP growth is projected at 6.5% in 2025 (CY) and 6.6% in

2026 (CY), with FY 2025-26 growth expected at 6.4% 2 - more than double the forecast global average.

The moderation in early 2025 reflects both external and domestic factors. On the external side, a slowdown in U.S. imports and weaker Chinese demand are expected to weigh on merchandise exports. Global trade softness, particularly in manufacturing-intensive sectors, could also limit shortterm growth impulses. Domestically, private consumption has shown signs of softening, influenced by elevated unemployment of around 8% (CY 2025) and a degree of job security concerns in urban areas.

Nevertheless, the overall outlook remains favourable. Stable food and fuel prices are expected to support real household incomes, while government-led infrastructure investment - in transport corridors, renewable energy, and digital connectivity - should underpin both near-term activity and longer-term productivity gains. Financial system stability, expanding credit availability, and robust corporate earnings growth further enhance Indias resilience.

From a structural perspective, India benefits from a large and youthful population, ongoing digital transformation, and policy initiatives aimed at manufacturing competitiveness and green energy transition. These strengths position the country well to sustain growth above the global average, even amid a more challenging external environment.

INDUSTRY OVERVIEW

HEAT EXCHANGER INDUSTRY

The global heat exchanger market, intrinsically linked to the broader Heating, Ventilation, Air Conditioning, and Refrigeration (HVACSR) industry, is experiencing robust growth driven by a confluence of technological advancements, increasing demand for energy-efficient solutions, and supportive regulatory frameworks worldwide. Heat exchangers are critical components enabling efficient thermal energy transfer across diverse industrial, commercial, and residential applications.

The global heat exchanger market was valued at approximately USD 18.9 billion in 2024 and is projected to reach around USD 33 billion by 2033, growing at a CAGR ranging from 5.3% to 6.6% during the forecast period (2025- 2033/2034). Growth is being driven by expanding energy efficiency mandates, rising industrialization, and ongoing infrastructure development across emerging and advanced economies.

Geographical Landscape:

While North America and Europe have traditionally been strong markets due to their industrial bases and manufacturing innovations, the global landscape is shifting. The Asia-Pacific (APAC) region has emerged as a key market, driven by large-scale industrialization in countries like China, India, and Southeast Asian nations. APAC was the fastest- growing heat exchanger market between 2019 and 2023, with a compounded growth rate of 7.3%. Indias market, for example, reached USD 689 million in 2023, growing at a CAGR of 10% between 2019 and 2023, and is projected to reach USD 1,487 million by 2030.

Key usage sectors:

Heat exchangers are extensively used across various sectors including chemical and petrochemicals, oil and gas, power generation, HVACSR (heating, ventilation, air conditioning, and refrigeration), food and beverages, pharmaceuticals, aerospace and defence, automotive, renewable energy, waste heat recovery, wastewater treatment, and data centers.

Drivers of Growth:

(a) rising regulatory pressure for energy efficiency and emissions reduction,

(b) industrial expansion and urbanization-especially in APAC,

(c) growing investments in renewable energy projects, and

(d) technological innovation focused on compact designs, smart sensors, and advanced manufacturing (e.g., additive manufacturing and loT-enabled predictive monitoring).

Looking ahead, the sectors growth is expected to be supported by stricter global energy policies like Europes Green Deal, the U.S. focus on industrial emission cuts, and emerging-market investments in clean infrastructure. Markets in the Middle East S Africa, Latin America, and North America are projected to grow at 5-7% CAGR through 2033-2034, fueled by energy projects, desalination, and heating/cooling infrastructure development . Meanwhile, Europes dominant position stems from strong regulation, innovation, and demand from the data center and renewable-energy sectors .

The India Story

The Indian heat exchanger market, a significant regional segment, is also projected for strong growth. Its valuation stood at USD 856.4 million in 2024, with a projected CAGR of 5.56% to reach USD 1,428.4 million by 2033. A more optimistic forecast estimates the Indian market at USD 1384.2 million in 2023, expanding to USD 3102.0 million by 2030 with a robust CAGR of 11.5%. The Indian heat exchanger sector is projected to reach USD 1.87 billion by FY2032, growing at nearly 9% annually. The primary drivers for this growth include accelerating industrialization and urbanization, escalating demand for power, the burgeoning chemical and petrochemical sectors, and the continuous upgradation of conventional heat exchangers with more efficient variants. Moreover, stringent government regulations aimed at improving energy efficiency are playing a crucial role in boosting market expansion. In terms of materials, stainless steel currently holds a dominant position, while the chemical industry represents the largest end-use market segment, closely followed by HVAC and Refrigeration.The Indian Heat Exchanger industry is also pivoting toward customized, efficient, and sustainable solutions, with increasing adoption of international standards, digital monitoring technologies, and low-GWP refrigerants.

Within this ecosystem, the HVACSR segment represents one of the fastest-growing verticals, fueled by

1. Infrastructure Expansion: Rapid development of infrastructure, including the construction of new airports, office spaces, shopping malls, hotels, and metro rail networks, drives the demand for advanced HVAC systems

2. Growth in the Building Sector: The building sector, encompassing residential, commercial, industrial, and infrastructure sub-sectors, is a key driver

3. Industrial HVAC Demand: In manufacturing plants, HVAC systems control humidity, temperature, and air quality, crucial for employee working conditions and maintaining optimal ecosystems for manufacturing processes, especially in pharmaceuticals, food & beverages, and electronic manufacturing

4. Cold Storage and Data Centers: Heat exchangers are vital in cold chain logistics for temperature-controlled storage and transport vehicles. In data centers, cooling systems account for nearly 40% of energy consumption, making efficient thermal management, enabled by heat exchangers, critical. India is projected to have 183 data centers by 2025, up from 151 in 2023, signaling a strong demand for HVAC systems and heat exchangers(KRN_ RHP)

Government Initiatives and Policy Support

The Indian government has implemented a comprehensive array of schemes and initiatives to support the heat exchanger and Heating, Ventilation, Air Conditioning, and Refrigeration (HVAC&R) industries. These efforts are primarily aimed at fostering energy efficiency, boosting domestic manufacturing, developing robust infrastructure, and promoting overall sustainability.

Here are the key government schemes and initiatives:

Promotion of Energy Efficiency and Sustainability

• Bureau of Energy Efficiency (BEE): The BEE plays a critical role in promoting energy efficiency across various sectors. Heat exchangers may need to comply with BEEs energy efficiency labelling requirements or specific energy-saving guidelines.

• Perform, Achieve and Trade (PAT) Scheme: In 2023, the guidelines for this scheme were updated to encourage industries to reduce energy consumption by adopting energy-efficient technologies, such as advanced heat exchangers.

• Energy Conservation Act (EC Act): This act regulates energy efficiency in India and mandates compliance for relevant equipment, including heat exchangers.

• Energy Conservation Building Code (ECBC) and Standards and Labelling (SSL) program: These initiatives have been crucial in driving the adoption of energy-efficient HVAC systems, especially in response to rising energy costs and environmental concerns. The broader focus on sustainable development and reducing carbon footprint is leading the HVAC industry to adopt new technologies and processes.

Boosting Domestic Manufacturing and Self-Reliance

• Make in India Campaign: This flagship initiative aims to transform India into a global manufacturing hub by promoting local production and reducing dependence on imports. This directly benefits the capital goods industry, including heat exchanger manufacturers, by enhancing domestic production capabilities.

• Production Linked Incentive (PLI) Scheme: Introduced to incentivize companies for increased sales of products manufactured in India, the PLI scheme covers sectors like electronics and white goods (including air conditioners), where heat exchangers are essential components. Specifically, the PLI scheme for white goods has encouraged local production of key components like heat exchangers, fostering a complete value chain for AC manufacturing and reducing import dependency.

• Atmanirbhar Bharat Abhiyan: This economic package aims to make India self-reliant, complementing the Make in India program by focusing on achieving self-sufficiency in the manufacturing sector and promoting local products.

• National Capital Goods Policy, 2016: This policy aims to significantly increase the capital goods sectors contribution to manufacturing output by 2025, which is expected to create substantial demand for heat exchangers.

• Phasing out concessional import duties: The Union Budget 2022-23s move to phase out concessional import duties on various capital goods and project imports supports the domestic capital goods industry by protecting it from low-cost imports and promoting a level playing field for Indian manufacturers.

Infrastructure Development

• Government Investments: Significant government investments in infrastructure, such as the projected USD 1.45 trillion over the next five years and INR 6,209.2 Crores for airport infrastructure development by 2030, directly drive the demand for HVAC systems and heat exchangers in new constructions including airports, office spaces, shopping malls, and hotels.

• Smart Cities Mission: This initiative, combined with a focus on infrastructure development and sustainable building practices, boosts the demand for efficient HVAC systems.

• PM Gati Shakti Master Plan: This ambitious plan aims to transform Indias infrastructure by improving freight movement, streamlining logistics, and enhancing industrial production, thereby creating strong demand for capital and engineering goods, including heat exchangers.

• Cold Chain Infrastructure: Policy-driven growth in cold chain infrastructure, supported by schemes like the Capital Investment Subsidy for Construction/Expansion/ Modernization of Cold Storages and Storages for Horticulture Products (National Horticulture Board) and the Scheme for Integrated Cold Chain, Value Addition, and Preservation Infrastructure under the Pradhan Mantri Kisan Sampada Yojana (Ministry of Food Processing Industries), directly benefits the HVAC industry by increasing demand for temperature-controlled solutions.

• Data Center Expansion: Government initiatives promoting large-scale digitization and increasing internet penetration are driving the expansion of data centers. These facilities rely heavily on HVAC systems and heat exchangers for crucial thermal management.

• Transportation Sector Growth: The significant expansion of transportation infrastructure, including national highways, railways, and metro networks, requires advanced HVAC solutions for both facilities and rolling stock, thereby boosting the demand for heat exchangers. KRN Heat Exchanger and Refrigeration Limited is also expanding its manufacturing to cater to the growing needs of railways for their electric engines.

Regulatory Framework and Support

• Indian Boiler Regulations (IBR): Administered by the Central Boiler Board (CBB), these regulations set mandatory guidelines for the design, construction, operation, and maintenance of boilers and pressure vessels, which include heat exchangers, when operating above specified pressure and temperature limits.

• Bureau of Indian Standards (BIS): As the national standards body, BIS formulates and implements Indian standards. Relevant standards for heat exchangers include IS 4503 (shell and tube), IS 10787 (plate), and IS 6034 (air-cooled). KRN also holds a BIS Product Certification license.

• Rajasthan Investment Promotion Scheme (RIPS):

Companies operating in Rajasthan, such as KRN Heat Exchanger and Refrigeration Limited, benefit from state- level incentives like State Goods and Services Tax (SGST) reimbursement, exemptions from electricity duty and land tax, and interest subsidies on term loans.

• Export Promotion Schemes: Indian manufacturers also benefit from various export promotion schemes, including the Duty Drawback Scheme, Remission of Duties and Taxes on Exported Products (RoDTEP), and Export Promotion Capital Goods (EPCG). These schemes support Indias efforts to become a net exporter of heat exchangers.

• Industrial Policy, 1991 and Foreign Exchange Management Act (FEMA): These regulations govern foreign investment in India, permitting up to 100% foreign investment in manufacturing activities.

Looking Ahead

The HVACSR segment will remain a key driver of the Indian heat exchanger market. KRNs core business is directly aligned with these high-growth segments and key drivers of both the global and Indian HVACSR and heat exchanger markets. This direct alignment means that KRN is well-positioned to benefit from strong secular tailwinds. The increasing demand for energy-efficient solutions, which are a core offering of heat exchangers, coupled with the rapid industrial development and urbanization in India and the broader Asia-Pacific region, provides a large and expanding addressable market for KRN. This market dynamic validates the companys strategic focus and its ongoing expansion plans, indicating a high probability of sustained demand for its products in the foreseeable future.

COMPANY OVERVIEW

OPERATIONS

We are actively engaged in the design, manufacturing, and supply of fin and tube-type heat exchangers, along with a range of related thermal solutions. Our products are predominantly crafted from non-ferrous metals, with copper and aluminum serving as the primary materials. Our extensive product portfolio includes essential components such as condenser coils, evaporator units, evaporator coils, headers/ copper parts, fluid and steam coils, and various sheet metal components. We offer six core product categories.

In fiscal year 2025, condenser coils accounted for 60.74% of our revenue, while evaporator coils contributed 30.39%, as compared to fiscal year 2024, condenser coils accounted for 55.01% of our revenue, while evaporator coils contributed 37.34%, highlighting these as the primary revenue-generating product streams. These products are widely utilized by Original Equipment Manufacturers (OEMs) across diverse HVACSR applications, including air conditioning, refrigeration, and process cooling systems. A key strength of ours lies in our capability to deliver customized coils, offering various configurations, tube diameters (from 5mm to 15.88mm), and fin patterns. This customization ensures optimal performance across a wide spectrum of refrigerants and client specifications. To guarantee compliance with international quality and safety standards, all our products undergo rigorous testing processes, with condenser and evaporator coils notably holding UL-207 recognition. Furthermore, advanced nano and powder coatings are applied to our products to enhance their durability and corrosion resistance, ensuring long-lasting solutions for end-users.

We operate two dedicated manufacturing units, both strategically located in Neemrana, Alwar, Rajasthan. These facilities are equipped with state-of-the-art machinery essential for coil manufacturing, including Hair Pin Benders,

Fin Press Machines, and Vertical Expanders. Additionally, we boast a modern press shop, utilizing NCT Punching and CNC bending machines for the in-house production of sheet metal parts. This integrated setup enables efficient and precise manufacturing processes. The total factory area is approximately 150,000 sq ft.

For the fiscal year 2025 we demonstrated high levels of capacity utilization across our key product lines. The utilization rate stood at 84.09% for evaporators and condenser coils, 84.53% for headers/copper parts, and 85.77% for sheet metal parts. These high capacity utilization rates in FY2025 underscore robust demand for our products and validate our strategic decision to pursue significant manufacturing expansion. While high utilization is indicative of efficient operations and strong market absorption, it also implies that our existing capacity has limited scope for further organic growth without additional investment. This situation could potentially lead to missed orders or extended lead times if market demand continues to surge. Therefore, the consistently high utilization rates provide a clear operational justification for the substantial capital investments we have planned. This demonstrates that our existing manufacturing infrastructure is operating near its limits, and expansion is a necessary step to effectively capture future market opportunities and sustain growth. Our total annual production capacity is 1 million units and is set to increase many folds with our planned expansion.

IMORT AND EXPORT DETAILS

Foreign Trade is a very important aspect of our business.

We import a large proportion of out raw materials and about 15.69% of our products are exported.

The company import goods for amount of Rs 229.95 Cr for March 31,2025 and of Rs 196.64 Cr for March 31, 2024.

The details of revenue from Export and other than export for March 31,2025 and the previous year are as under:

Category	2025		2024
	Amount	%	Amount	%
Export	67.45	15.69	45.27	14.69
Domestic	361.71	84.15	262.85	85.26
Other Income	0.69	0.16	0.16	0.05
Total	429.85	100	308.28	100

The highlights of the financial results for the year ended March 31, 2025 and the corresponding figure for the previous year are as under:

( in Cr except EPS)

Particulars	Standalone		Consolidated
	2024-25	2023-24	2024-25	2023-24
Revenue from Operations	431.19	308.24	429.85	308.28
Other Income	7.28	5.36	11.86	5.46
Total Income	438.47	313.60	441.71	313.74
Total Expenditure	367.22	257.21	367.39	257.81
Profit before tax	71.24	56.39	74.32	55.93
Current Tax	21.65	16.88	21.91	55.93
Income tax Adjustment	(0.0030	(0.18)	(0.003)	(0.18)
Deferred Tax Adjustment	(0.55)	(0.20)	(0.43)	(0.16)
Profit after Tax	50.17	39.89	52.87	39.30
Basic Earnings per share (in Rs)	9.25	8.87	9.75	8.76

Our products are designed to meet international quality standards and offer customization based on client needs. Key aspects of their quality and operational excellence include:

1. Advanced Coatings: We apply nano coating and powder coating to copper tubes, brazing joints, and fin sheets to improve longevity and corrosion resistance, ensuring efficient heat exchanger operation and reduced maintenance costs

2. Stringent Testing: They maintain an in-house facility for checking the quality of the manufactured products to ensure the best quality products are supplied to their customers.

3. Certifications: KRN holds various industry certifications, demonstrating its commitment to quality and compliance.

4. Trained Personnel: Key employees of the production team hold BS EN ISO-13585 certification, which specifies the basic requirements for the qualification testing of brazers and brazing operators which is one of the key processes of manufacturing heat exchangers. KRN established an internal Brazing school in 2022 to enhance staff skills.

5. Multilevel Quality Checks: These multi-level quality checks from raw material procurement to delivery ensure consistent delivery of good quality products, enhancing our brand value.

6. Latest Technology: KRN has integrated the latest technology in plant and machinery to deliver exceptional products.

MARKETING APPROACH

KRN Heat Exchanger and Refrigeration Limited adopts a relationship-driven, customer-centric marketing approach supported by a dedicated team of experienced professionals. With a strong presence in both domestic and international markets-including a sales team based in the Czech Republic-KRN focuses on timely delivery, quality assurance, and deep engagement with long-standing clients. Under the leadership of Promoter Mr. Santosh Kumar Yadav, the company emphasizes regular client interaction to understand evolving needs, develop adjacent products and applications, and strengthen its position as a preferred supplier. The strategy includes early-stage engagement, multi-level client contact, and value-added services, supported by an effective feedback mechanism to continuously improve product performance and customer satisfaction.

Our marketing strategy is framed in the following way:

- focusing on the customers

- making the effort to become a preferred supplier early in the process.

- interacting with customers at multiple levels.

- extending the product offering by adding services.

- Focusing on the development of adjacent products, markets, and applications

OPPORTUNITIES

• Rising Demand for HVACSR Solutions

• Expansion in Export Markets

• Government Support and PLI Schemes

• Capacity Expansion and New Product Lines

• Increased Focus on ESG and Green Technologies

• Technological Upgradation and Automation

THREATS

• Geopolitical Instability and Trade Tensions

• Raw Material Price Fluctuations

• Foreign Exchange Risk

• Competitive Pressures

• Regulatory and Environmental Compliance

• Supply Chain Disruptions

• Customer Concentration Risk

• Technological Obsolescence

RISKS AND MITIGATION

Risk Management

At KRN Heat Exchanger and Refrigeration Limited, we acknowledge that a variety of internal and external risks impact our business operations, financial performance, and strategic growth. We have established risk management practices focused on identifying, assessing, and mitigating significant risks to create sustainable value for our customers, stakeholders, and investors.

Risk	Impact	Mitigation
Customer Concentration Risk	High dependence on a limited number of customers, especially Daikin Airconditioning India Private Limited, poses a risk of revenue fluctuations due to order cancellations, delays or non-renewal of contracts.	We focus on diversifying our customer base by expanding our reach in domestic and international markets, serving over 80 customers in recent periods. We aim to build deeper, long-term relationships and continuously improve product and service quality to retain key customers.
Supplier and Raw Material Dependency	Dependence on few suppliers for critical raw materials, including copper, aluminium, and others procured largely through imports, can lead to supply shortages, price volatility, and increased costs.	We proactively diversify suppliers and maintain strategic inventory buffers. Our sourcing team actively mitigates supply chain risks, while continuous supplier assessment helps ensure quality and timely delivery. Forward contracts and alternate sourcing strategies are explored to mitigate price fluctuations.
Foreign Exchange Risk	Significant import of raw materials and export revenue exposes the company to currency fluctuations impacting costs and profitability.	We employ short-term hedging strategies such as forward exchange contracts to manage currency risk. We also review procurement and pricing strategies periodically to minimize the negative impact of foreign exchange variations.
Working Capital and Debt Management	High working capital requirements funded through borrowings can affect liquidity and limit growth opportunities.	Our treasury team monitors cash flows to optimize working capital. We maintain healthy debt servicing ratios and actively engage with lenders to ensure reasonable financing terms. Capital budgeting is done prudently to avoid overleveraging.
Growth and Capacity Risks	Rapid expansion and new manufacturing setups expose the company to project delays, cost overruns, operational inefficiencies and scaling challenges.	Capital expenditure projects are monitored closely for timelines and cost control. Experienced project management teams and periodic reviews help mitigate execution risks. We emphasize process improvements and skill development to support sustainable growth.
Manufacturing and Operational Risks	Disruptions due to equipment failure, power outages, labor issues or natural calamities can affect production and delivery timelines.	We maintain backup power sources including diesel generators and solar installations, and have preventive maintenance schedules for machinery. Contingency plans including alternative production arrangements help minimize disruptions. Safety protocols and training programs help reduce workplace accidents.
Regulatory and Compliance Risks	Non-compliance with labor laws, environmental permits, tax regulations or delayed statutory filings may attract penalties or operational restrictions.	The company invests in strengthening compliance functions with regular audits and timely filings. We engage with legal and regulatory experts to ensure adherence to changing laws and standards. Environmental and safety certifications are maintained and periodically renewed.
Product Quality and Technical Specifications Risk	Failure to meet stringent technical and quality specifications can result in order cancellations, reputational damage, or warranty claims.	Quality assurance teams rigorously monitor production standards and customer requirements. Obtained certifications such as ISO 9001:2015 are maintained. Continuous R&D and employee training ensure adherence to technical specifications.
Related Party Transaction and Conflict of Interest Risks	Transactions involving promoters and related parties may give rise to real or perceived conflicts affecting governance and minority shareholder interests.	All related party transactions are conducted on an arm\u2019s length basis and subject to regulatory approvals, board oversight, and disclosure requirements. The Company follows strict corporate governance standards to address potential conflicts transparently.
Geographical Concentration Risk	Majority of manufacturing and sales activities are concentrated in the Rajasthan region, exposing operations to regional economic, political or natural disruptions.	The company pursues gradual geographical diversification of customers and markets. Business continuity and disaster management plans are in place to mitigate localized risks.
Industry and Market Risks	Changes in HVAC sector dynamics, economic slowdowns, or reduction in customer outsourcing trends could impact sales volumes and margins.	We continuously innovate product offerings and explore new markets to stay competitive. Strategic partnerships and customer engagement initiatives help enhance adaptability to market changes.
Environmental and Sustainability Risks	Increasing regulations on emissions, energy consumption, and hazardous materials handling can raise compliance costs and impact business operations.	We are committed to environmental stewardship with compliance to all local and national environmental norms. Investments in energy-efficient technologies, waste reduction measures, and sustainable sourcing underpin our strategic response to climate-related risks.
Information Security and Fraud Risk	Potential fraud, theft or system failures can disrupt operations and damage reputation.	The company maintains strong internal controls, surveillance, and insurance coverage. Regular audits and governance mechanisms reduce fraud risk and ensure financial integrity.
Market Risks - Liquidity and Price Volatility	Post listing, equity share price may experience volatility due to market conditions, investor sentiment, or macroeconomic factors, affecting liquidity and valuation.	We engage with investors and analysts through transparent disclosures and investor relations initiatives. Continuous market monitoring and adherence to regulatory requirements support price stability and investor confidence.
Changes in Laws and Tax Regime	Amendments to tax laws, regulations, or labor codes could increase compliance burden and cost structure.	The company consults with tax and legal experts regularly to incorporate changes promptly. Forward planning and scenario analysis help mitigate impact of regulatory changes on profitability.

This Risk Management framework reflects our proactive approach to risk assessment and mitigation, helping us to sustain our growth trajectory while safeguarding stakeholder interests. We continuously refine our risk processes to address emerging challenges and ensure operational excellence and regulatory compliance.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

KRN has established a robust internal control framework designed to ensure the integrity and reliability of its financial reporting, safeguard its assets, and promote adherence to statutory, regulatory, and internal procedural requirements. These internal controls are rigorously formulated, documented, and implemented in alignment with the size, complexity, and scale of KRNs operations. The framework encompasses clearly defined policies and authorization protocols for all material transactions, aiming to maintain operational effectiveness and mitigate the risk of fraud.

The Board of Directors is ultimately responsible for the design, implementation, and continued adequacy of internal controls relevant to the preparation and fair presentation of both consolidated and standalone financial information, in full compliance with the requirements of the Companies Act, SEBI (ICDR) Regulations, and applicable guidance notes. The Audit Committee, together with the internal audit function, plays a vital oversight role-reviewing the sufficiency and efficacy of internal audit procedures and continuously monitoring compliance across all business functions and locations.

Internal audits, which are conducted at regular intervals by experienced external professionals as well as the internal audit team, provide an independent appraisal of the operational effectiveness and adequacy of internal controls. These audits cover key financial, operational, and compliance domains, with findings and recommendations reviewed in detail by the Audit Committee. Action plans to address any identified gaps are closely monitored for timely remediation.

While KRN is committed to maintaining a strong internal control environment, it is recognized that the effectiveness of these controls may be challenged by dynamic business conditions and evolving risks. The Company remains vigilant and proactive in identifying, rectifying, and mitigating any deficiencies that may arise, thereby supporting the accuracy of financial reporting, effective risk management, and the prevention of fraud. The Board continually assesses and enhances the internal control and risk management systems to support sustainable and compliant business operations.

CORPORATE SOCIAL RESPONSIBILITY

We demonstrate a commitment to corporate citizenship through our established Corporate Social Responsibility Policy and a dedicated CSR Committee, in compliance with Section 135 of the Companies Act, 2013. The CSR Committee was reconstituted on March 27, 2024.

In Fiscal Year 2025, the total expenditure required to be spent on CSR was 0.80 Cr, and the amount spent was Rs 0.81 Cr. In Fiscal Year 2025, we actively engaged in several CSR initiatives, primarily focusing on providing support to local government schools and hospitals within our operational vicinity.

Our CSR activities in FY2025 highlight a localized and tangible commitment to community welfare, particularly in the critical areas of education and healthcare. These direct, local engagement efforts, rather than broad, thematic programs, indicate our dedication to being a responsible corporate citizen within our immediate operational areas.

Such initiatives are instrumental in fostering goodwill, strengthening community relations, and enhancing our social license to operate, which is an increasingly vital aspect of long-term sustainability and reputation management.

HUMAN RESOURCES AND INDUSTRIAL RELATIONS

As of July 31, 2025, we maintained a substantial workforce of over 768 professionals, including 208 full-time and 560 contractual employees. We place a strong emphasis on continuous learning and professional development, regularly organizing training sessions for both our workers and staff. These training programs often include seminars conducted by respected industry experts, fostering an environment of ongoing skill enhancement and knowledge acquisition. We have also established an internal Brazing school to enhance staff skills.

We have formalized our human resources practices through the establishment of several key policies. These include a Nomination And Remuneration Policy and a comprehensive Policy on Sexual Harassment of Women at Workplace. The latter policy is particularly robust, covering all employees and outlining detailed procedures for the prevention, prohibition, and redressal of sexual harassment, supported by an Internal Complaints Committee. Our broader Code of Ethics reinforces these commitments by emphasizing Concern for Others and Integrity, aiming to cultivate a safe, healthy, and ethical workplace environment for all employees. We prioritize the health and safety of our employees, holding the ISO 45001:2018 Occupational Health and Safety Management Systems certification, conducting annual external safety tests, and providing employee benefits such as Group Personal Accident Cover and Group Health (Floater) Insurance, along with adequate safety equipment.

We maintain a significant workforce and actively invest in employee development through structured training programs. This commitment to skill development enhances operational efficiency and prepares our workforce to adapt to new technologies, particularly relevant given our new product lines. The formal HR policies demonstrate a structured approach to employee welfare, ethical conduct, and legal compliance. This fosters a positive work environment, mitigates human resources-related risks, and contributes to our overall stability and productivity. We have maintained a harmonious labor environment with no major disputes in the past three years.

KET RATIOS

Particulars	FY 2025	FY2024
Revenue ( in Cr)	429.85	308.28
Net Profit After Tax ( in Cr)	52.88	39.39
Earnings per share (in Rs)	9.75	8.76
Operating Profit Margin (%)	16.40	18.96
Net Profit Margin (%)	12.30	12.78
Return on Net worth	16.81	41.87
Current Ratio (times)	4.52	1.66
Debtors Turnover(times)	5.91	6.77
Debt-equity (times)	0.07	0.46
Interest Coverage Ratio(times)	8.65	8.28

FUTURE OUTLOOK

• Robust Demand Drivers Ahead

• Scaling Capacities to Meet Demand

• Expanding Global Footprint

• Product Innovation and Diversification

CAUTIONARY STATEMENT

Statements in this Management Discussion and Analysis report detailing the Companys objectives, projections, estimates, expectations or predictions may be forward looking statements within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include global and Indian demand supply conditions, raw material prices, finished goods prices, cyclical demand and pricing in the Companys products and their principal markets, changes in Government regulations, tax regimes, economic developments within India and the countries with which the Company conducts business and other factors such as litigation and / or labor negotiations.