Detailed Narrative
Overall Financial Performance and Outlook
KDDL Limited delivered strong results for Q4 and full year FY26, surpassing expectations despite a challenging global economic environment. Standalone revenue for Q4 FY26 grew 42% YoY to ₹145.3 crores, with full year revenue reaching ₹506 crores, a 31.9% increase. Consolidated revenue for FY26 stood at ₹2,207.8 crores, up 30.3% YoY. The company's EBITDA margins also saw significant improvement, with standalone Q4 FY26 EBITDA margin at a high of 25.1% and consolidated FY26 EBITDA margin at 16.4%. Management expressed confidence in the outlook, driven by supply chain diversification and strategic partnerships.
Segmental Performance: Manufacturing Divisions
The Watch Components business, including dials, hands, and bracelets, showed recovery in H2 FY26 after a quiet first half. For FY26, the manufacturing watch component business (excluding Ethos) reported revenue of ₹240 crores, a 20% YoY growth. The Precision Engineering (Eigen) division had an exceptionally successful year, with revenue growing over 35% YoY to approximately ₹200 crores, driven by strong export momentum. The Bracelets division also performed strongly, with current revenue around ₹40 crores, and is expected to deliver good revenue growth in FY27 and FY28, though margins might moderate due to new customer price points. The Ornapac (Packaging) division saw revenue growth of over 35% YoY to ₹23 crores, with expectations to become profitable in H2 FY27.
Ethos Performance and Expansion Strategy
Ethos continued its strong performance in FY26, with management stating they are ahead of their goal to achieve 10x revenue in 10 years, which requires a 25.9% or 26% CAGR. The company has crossed 100 boutiques and aims to double its network in the next 3 years. Ethos is focusing on company-owned and operated (COCO) stores for expansion. While not prioritizing ASP increase, they anticipate faster volume growth in Tier 2 and Tier 3 cities. A new format targeting the ₹25,000 to ₹2 lakh price point is also being launched to drive future growth.
Favre-Leuba Brand Update
The Favre-Leuba brand, owned by Silvercity Brands in Switzerland, performed better than expected in the last fiscal year, with sales exceeding projections. The company is ramping up production to meet demand, as most stores are short of stock. Management expects to more than double Favre-Leuba's sales in FY27 and significantly expand its global footprint with new product launches, attributing success to the vision of the brand guardian and CEO.
Capital Expenditure Plans and Backward Integration
KDDL plans a capital expenditure of approximately ₹50 crores across its businesses for FY27, covering both maintenance and growth-oriented investments. The major portion of this capex will be allocated to the Precision Engineering and Bracelets divisions. For Precision Engineering, backward integration, specifically for the plating process, is underway and expected to be commissioned and utilized within the next 3-4 months. The Bracelets division's capacity is projected to expand from approximately 75,000 units to 110,000-120,000 units over the next 12 months.
Macroeconomic Headwinds and Margin Management
The company acknowledged persistent global economic uncertainty and weak consumer demand in key luxury markets, particularly China and parts of Europe. Despite these challenges, KDDL remains confident in its outlook, citing supply chain diversification and strong manufacturing capabilities. Management noted that while they aim to protect margins, they are also willing to compromise them strategically to gain market share and enter new markets. They also highlighted that higher inflation and wage costs in India (10-11% annual increments) compared to international markets (0.5-2% in Switzerland) impact operating leverage, despite earning in foreign currencies.