KDDL Ltd

KDDL's watch component business faced significant challenges in FY25, with overall revenue declining by nearly 20% year-on-year. This was primarily driven by a 28% decline in export revenue, heavily impacted by demand contraction in key markets like China and Hong Kong (down 25.8% and 19% respectively). Despite this, the domestic market showed resilience, growing by 13% during the year. Management anticipates a gradual revival in the international watch market, beginning in the second half of FY26, and is strategically expanding product offerings to mid-to-high value segments and exploring new geographies beyond Switzerland.

The precision engineering business emerged as a strong performer, recording a 55% year-on-year growth in revenue to INR 147 crores in FY25. This segment continues to demonstrate healthy momentum, fueled by robust export demand and exceeding customer expectations. Management expects this business to grow at a long-term rate of 25% and maintain EBITDA margins in the range of 19-20% for FY26. Key growth drivers include alternate energy (EV and battery storage systems) and aerospace sectors, with a new 28,000 sq ft facility in Bengaluru becoming operational in H2 FY26 to support future demand.

Favre Leuba is positioned as a strategic new business, allowing KDDL to own and control the entire value chain of a Swiss watch brand, from component manufacturing to distribution. The brand has seen a "great response" in India, with distribution launched and products falling short of demand. Favre Leuba watches are priced between CHF 2,000 and CHF 4,500, offering superior specifications (e.g., La Joux-Perret movement) at a 20-25% lower price point than competitors. While an aspiration of 100,000 units per annum exists long-term, management aims for faster growth and expects initial losses to diminish by FY28.

The bracelet division, dedicated to exports, is integral to KDDL's strategy, with current capacity utilization at about 50%. Management anticipates this rising to 65% in FY26, with plans to enhance capacity to approximately 90,000 units per annum. The packaging division saw revenue improve by 13% in FY25, driven by robust domestic demand from watch and jewelry segments, and is targeting international brands. Management projects a revenue growth upward of 20% CAGR for packaging over the next 5-10 years, with the new unit expected to reach 60-70% capacity utilization in FY26.

KDDL reported a consolidated total income of INR 431 crores for Q4 FY25 and INR 1,695 crores for the full FY25. Consolidated EBITDA for Q4 FY25 was INR 75.9 crores (17.6% margin), and for FY25, it was INR 307 crores (18.1% margin). PAT stood at INR 31.6 crores for Q4 FY25 and INR 142.3 crores for FY25. Profitability in Q4 was impacted by a shift in product mix towards lower-margin precision engineering and nascent bracelet/packaging businesses. For FY26, KDDL expects overall revenue growth of 15-20% and aims to maintain EBITDA margins broadly in the similar range as FY25 (around 23% stand-alone). A capex of INR 35 crores is planned for FY26.