Kaynes Tech Q4 FY26 earnings call

Kaynes Technology reported a consolidated total revenue of INR3,626.4 crores for FY26, reflecting a 33.2% year-on-year growth. EBITDA for the period was INR574.1 crores, growing 39.8% with a margin of 15.8%, and PAT stood at INR363.9 crores (10% margin). However, the company missed its revised FY26 revenue guidance of INR4,000 crores, having initially targeted INR4,500 crores. This miss was attributed to geopolitical disruption^🌐s, customer deferments, a 90% revenue drop from a major EV OEM, and delays in two government projects.

While the core EMS business demonstrated improved working capital efficiency, with days reducing from 83 in FY24 to 53 in FY26, the consolidated working capital days for FY26 stood at approximately 122 days. This was primarily due to the smart meter segment, which contributed to a negative operating cash flow of around INR600 crores in Q3 FY26. Management acknowledged the challenge, stating that the metering business receivables increased from INR521 crores to INR1,300 crores, but expressed confidence in mitigating this impact and improving OCF within three quarters.

Kaynes Technology is actively transitioning from an EMS-led organization to a differentiated ESDM and product-driven enterprise. The company aims to increase the contribution of NPD-led and value-added solutions to nearly 30% of its total revenue in the coming years. This transformation is supported by investments in engineering capabilities, a co-development model, digital infrastructure, and R&D, with the goal of improving margins and establishing Kaynes as a strategic technology partner.

The company is making significant progress in its new growth engines. OSAT Unit 1 is fully operational, and Unit 2 is expected to commercialize by Q2 FY27. The OSAT segment has a strong order outlook, with revenue visibility exceeding INR2,500 crores over the next five years. Similarly, the PCB segment has a robust and confirmed demand pipeline for the next five years, with customers indicating a need for additional capacity expansion. For FY27, management expects PCB revenue to be INR300-400 crores and OSAT revenue to be INR250-300 crores.

The rail business, particularly the Kavach product, has received initial approval and trial orders, and is currently in the execution stage. Management anticipates completing all necessary approvals in H1 FY27 and securing a large portion of orders in H2 FY27. For the current year, the rail business is expected to grow by 20-25%, with margins projected to be north of 30%.

Kaynes is enhancing its leadership and governance structure by bringing in new board members with diverse expertise in finance, public sector electronics, space technology, and automotive operations. The company is also committed to operational excellence, implementing initiatives such as predictive maintenance, advanced quality systems, and Industry 4.0 integration to improve productivity, reduce process variability, and strengthen supply chain integration.

The intangible asset on the balance sheet increased by approximately INR300 crores from FY25 to FY26, reaching INR536 crores. This increase is primarily attributed to the acquisitions of Iskraemeco and August Electronics, which involved a capitalized intangible asset of INR320 crores. In Q4 FY26, the company amortized INR32 crores of these intangible assets, which impacted the Profit Before Tax (PBT). Going forward^⏳, Kaynes plans to shift to quarterly amortization of these assets.