Forbes India Hidden Gems 2024: Finding diamonds in the rough

Till a few months ago, a company called KRN Heat Exchanger and Refrigeration wouldn’t have been in too many conversations in investor and punter circles. Till it was set to go public in end-September, with an initial offer priced at ₹220. It listed on the National Stock Exchange in early October at ₹440 and was quoting at well over ₹600 a month later.

KRN is a maker of aluminium and copper heat exchangers, water coils and evaporator coils that are used in air conditioners and refrigerators. Headquartered in Rajasthan’s Neemrana, it gets a third of its revenue from exports to countries that include the United States, Italy and Germany. In fiscal year 2024, it reported net profits of almost ₹40 crore on sales of ₹308 crore.

Investors have bought into a company that is on a heady growth path, with a robust three-year compound annual growth rate of revenues and profits.

Cut to the SME stock exchanges, where a clutch of initial public offerings (IPOs) by little-known entities has made investors rich. Although a huge question mark hovers over the long-term prospects of many of these companies, their higher risk profile hasn’t dampened their short-term prospects. So, recent SME IPOs of companies like Afcom Holdings, Sodhani Academy of Fintech Enablers (which rather serendipitously condenses to SAFE) and Sahasra Electronic Solutions have yielded returns of 3x to almost 5x in two to three months.

Going by that record, many of these multibaggers appear like gems—at least so far—that investors have had the opportunity to add to their portfolio and enrich it. Few would have known much about these companies or even heard about them before they stormed the primary markets. But what if somebody had told you about KRN years ago, and that it was set to embark on a growth path with marquee clients from the West as well as the likes of Voltas, Kirloskar, Carrier and Daikin in India?