IKIO Tech — Q4 FY25 earnings call

Call held 14 May 2025

Management summary

IKIO Technologies reported an 11% YoY revenue growth for FY25, reaching INR486 crores, with Q4 FY25 revenue up 18% YoY to INR112 crores. Gross margins remained stable at 42%. However, profitability was significantly impacted by lower ODM revenues, front-loaded expenses for new ventures, and one-time provisions, leading to a negative PAT in Q4 FY25. The company is actively diversifying into new geographies and product categories, including successful commercial production for Honeywell, and has deployed 72% of its IPO funds.

Highlights

  • FY25 Revenue grew 11% YoY to INR486 crores, demonstrating overall growth despite challenges.

  • Q4 FY25 Consolidated Revenue increased 18% YoY to INR112 crores.

  • Gross margin remained stable at 42% for the full year FY25, indicating core business strength.

  • Successful entry into the Gulf market and progress in US expansion, with the US subsidiary beginning to generate revenue.

  • Commercial production has commenced for Honeywell products, which are 100% import substitutes for India.

Concerns

  • FY25 EBITDA declined to INR60 crores from INR93 crores in FY24.

  • FY25 PAT decreased to INR32 crores from INR61 crores in FY24.

  • Q4 FY25 PAT was negative INR1 crores.

  • Profitability was impacted by lower revenues from the ODM segment, front-loaded expenses for new facilities and products, and provisions of INR6 crores for Inventory and Debtors, plus INR1 crore for ESOP-related expenses.

  • Market demand slowdown was noted across the lighting industry.

Key financials

2 periods

Q4 FY25

  • Consolidated Revenue
    ₹112 Cr
    YoY +18%
  • EBITDA Margin
    5.5%
  • PAT
    ₹-1 Cr

FY25

  • Revenue
    ₹486 Cr
    YoY +11%
  • Gross Margin
    42%
  • EBITDA
    ₹60 Cr
    YoY -35.5%
  • PAT
    ₹32 Cr
    YoY -47.5%
  • Cash PAT
    ₹64 Cr

What they filed

Q1 FY27: revenue up 15.9%, net profit up 37.1% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue58 45 38 39 49 −15%44 −2%38 −1%45 +16%
EBITDA5 4 1 2 4 −18%3 −33%2 +61%4 +136%
Net profit7 5 3 3 5 −26%4 −27%3 −9%5 +37%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

medium confidence
  • Capex Capex disclosed
    On the IPO proceeds, the repayment of debt was completed immediately after the IPO. Block I is now operational and Block II civil construction is nearly completion. We have now deployed around 72% of IPO fund, and we are on the course to completely deploying the rest within the time line we set for ourselves.
  • Debt Debt disclosed
    • Repayment Repayment of debt completed immediately after the IPO.
    On the IPO proceeds, the repayment of debt was completed immediately after the IPO.
  • M&A AG Investments (via Ritech Holdings Limited, UAE) Joint venture · Signed · Consideration ₹[object Object] (undisclosed)

    Leverage AG Investments' network and industry expertise for broader customer base across the Middle East.

    Aims to strengthen presence in the region and diversify revenue.

    Ritech Holdings Limited, UAE, a wholly-owned step-down subsidiary of IKIO Technologies Limited, has entered into a joint venture agreement with AG Investments. This strategic partnership leverages AG Investments' extensive network and industry expertise, providing access to a broader customer base across the Middle East.

Guidance & targets

PLI Scheme Benefits

  • PLI benefits in first year PLI Scheme Benefits · first year · High confidence INR4 crores
    So, in the first year, it's going to be somewhere around INR4 crores.

    — Sanjeet Singh

PLI Scheme Threshold

  • Incremental sale threshold for PLI PLI Scheme Threshold · first year · High confidence INR90 crores
    Yes, yes. The threshold is INR90 crores and 4% of INR90 crores.

    — Sanjeet Singh

What to watch in Q1 FY26

FY26 Revenue and Profitability Guidance

next quarter (by Q2 FY26 results)
Current Not yet provided
Target Specific numerical guidance for FY26

Why it matters

Crucial for investor modeling and understanding management's outlook for the upcoming fiscal year.

So we are preparing that. And I think we'll be able to provide a detailed or better guidance by the next quarter. ... But next year, we are targeting much better growth than this, but we will definitely get back to you in this by the second quarter in terms of the guidance.

Risks & concerns

  • Lower revenues from ODM segment

    medium

    ODM business dropped by 14-15%, impacting overall revenue growth and profitability.

    Management acknowledged

  • Front-loaded expenses for new ventures

    medium

    Increased employee costs and depreciation related to new facilities and recently launched products impacted EBITDA and PAT.

    Management acknowledged

  • Provisions for Inventory and Debtors

    medium

    A provision of INR6 crores for Inventory and Debtors further affected Q4 FY25 profitability.

    Management acknowledged

  • Market demand slowdown

    medium

    General market demand in the lighting industry has come down, affecting overall business.

    Management acknowledged

  • Maturity period for new business ventures

    medium

    New verticals and product categories take time to mature and generate expected margins, impacting near-term profitability.

    Management acknowledged

  • ESOP-related expenses

    low

    INR1 crore in ESOP-related expenses contributed to the Q4 FY25 profitability impact.

    Management acknowledged

Q&A highlights

6 direct
Macro environment, margin dip, and dumping in LED industry Direct
So if you look at where we were a year or so back and what has changed in the market, first and foremost is the market demand, which has sort of come down. And that is happening across the market. It's not just 1 or 2 areas in the lighting industry. ... So dipping of margins is only due to certain factors. First and foremost, the onboarding of expenses that we have done for the new verticals, a lot of new verticals, or product categories or initiatives that we have taken, so it takes some time for them to mature or stabilize and to start generating the kind of margins that we expect them to generate.

Management explained the reasons for margin compression, attributing it to a general market demand slowdown, front-loaded expenses for new ventures, and depreciation, rather than dumping from other countries.

Asked by Mahesh Atal

Guidance for next financial year (FY26) Partial
So we are preparing that. And I think we'll be able to provide a detailed or better guidance by the next quarter. ... But next year, we are targeting much better growth than this, but we will definitely get back to you in this by the second quarter in terms of the guidance.

Management deferred providing specific FY26 guidance, indicating it's still being prepared, which leaves investors without immediate forward-looking numbers.

Asked by Mahesh Atal

Progress with Honeywell partnership Direct
So, yes, last quarter, we did speak about Honeywell, I'm glad you asked this question. So we got a chance to give you an update on the same. So till last quarter, we were developing products. So we are not just one, but we are developing products for them. And in fact, a couple of products have already now gone into production. So we supplied the first trial lots of a couple of products and the production has -- commercial production has now started. So it is materializing.

Confirmed that the Honeywell partnership has moved from product development to commercial production, signifying a new revenue stream and validation of the company's capabilities.

Asked by Sanjay Sood

Revenue contribution from wearable and hearable business Direct
So last quarter, in terms of absolute value, it should be close to around -- maybe around -- somewhere around 10-ish in terms of absolute value, around INR10 crores. But the way we look at this vertical is quite different. We are being steady, because we don't want to follow what the market is doing as of now.

Provided a specific revenue figure for the new wearable/hearable segment (INR10 crores in Q4), indicating initial traction and a cautious approach to market expansion.

Asked by Sanjay Sood

Products to be manufactured in the new plant Direct
So the new plant, like Honeywell is one classic example. So it is going to be a mix of lighting and non-lighting. So going forward, we are diversifying like we keep saying from the last, I would say, a couple of quarters, that has been our strategy going forward. So lighting is... ... So today, I can talk of Honeywell. Maybe next quarter, there are going to be a couple of more companies, which I'll be able to speak of. So a lot is happening in the background, and we'll keep you posted on all of the new developments.

Clarified that the new plant will produce a mix of lighting and non-lighting products, including those for Honeywell (sensors, fire panels), aligning with the company's diversification strategy and import substitution focus.

Asked by Sanjay Sood

Margins for new products/facilities and ODM business Direct
So on the margin side, like you said, because we are into the ODM segment, so in ODM, we look at margins differently because when you're developing a product in the ODM segment, then a lot of tooling, a lot of time is devoted. It takes about 3 months to 6 months to develop a product and to test, validate everything. So it takes about that much time. ... So if you ask about the margins, then the margins are going to be similar in terms of where we are with our rest of the business.

Management explained that new ODM products involve initial development costs but expect margins to align with the rest of the business once mature, reassuring investors about long-term profitability.

Asked by Mahesh Atal

PLI scheme approval and target achievement Direct
Yes, we already got the approval. ... Definitely. We are working on that. ... So, in the first year, it's going to be somewhere around INR4 crores. ... The threshold is INR90 crores and 4% of INR90 crores.

Confirmed PLI scheme approval and provided specific financial targets (INR4 crores benefit on INR90 crores incremental sales threshold in the first year), offering clarity on this government incentive.

Asked by Mahesh Atal

2 min read 6 chapters

Detailed narrative

Q4 & FY25 Financial Performance Overview

For the full fiscal year 2025, IKIO Technologies reported a revenue of INR486 crores, marking an 11% year-on-year growth. The gross margin for FY25 remained stable at 42%. However, EBITDA for FY25 stood at INR60 crores, a decrease from INR93 crores in FY24, and PAT was INR32 crores, down from INR61 crores in FY24. In Q4 FY25, consolidated revenue grew 18% year-on-year to INR112 crores, but the EBITDA margin was 5.5% and PAT was negative INR1 crores, primarily due to specific provisions and expenses.

Strategic Initiatives and Market Expansion

The company has successfully expanded its global footprint, with international markets contributing 22% to FY25 revenue. A joint venture with AG Investments in the UAE aims to strengthen presence in the Middle East, leveraging their network. In the US, the subsidiary has started generating revenue from industrial and solar products, and Royalux LLC has gained direct access to RV customers. These initiatives are key to diversifying revenue across products and geographies, with management optimistic about long-term impact.

Factors Impacting Profitability

Profitability in FY25, particularly in Q4, was impacted by several factors. These include lower revenues from the ODM segment, which saw a 14-15% drop, and front-loaded expenses such as increased employee costs and depreciation related to the new facility and recently launched products. Additionally, Q4 FY25 saw a provision of INR6 crores for Inventory and Debtors, and INR1 crore for ESOP-related expenses. Despite these, the company reported a healthy cash PAT of INR13 crores in Q4 FY25 and INR64 crores for the full year FY25.

IPO Proceeds Utilization and New Facilities

Following its IPO, IKIO Technologies completed the repayment of debt. The company has deployed approximately 72% of its IPO funds, with Block I of the new facility now operational and Block II civil construction nearing completion. Management is on track to fully deploy the remaining funds within the stipulated timeline, indicating progress on capacity expansion and infrastructure development.

New Product Development and Honeywell Partnership

IKIO Technologies has made significant progress in new product development, particularly with Honeywell. The company has moved from developing products to commercial production for Honeywell, supplying first trial lots of sensors and fire panels. These products are 100% import substitutes, highlighting the company's focus on domestic manufacturing. The new plant will produce a mix of lighting and non-lighting products, aligning with the broader strategy of diversification beyond traditional lighting.

PLI Scheme Participation and Benefits

The company has received approval for the Production Linked Incentive (PLI) scheme. For the first year, IKIO expects to receive approximately INR4 crores in benefits, based on an incremental sales threshold of INR90 crores. The PLI scheme covers about 8 categories, primarily focusing on semi-finished goods (SFGs) rather than finished products, which aligns with IKIO's manufacturing capabilities and contribution to the supply chain.

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