Detailed Narrative
Q2 FY26 Financial Performance Overview
Kellton Tech reported a Q2 FY26 revenue of ₹300 crores, marking an 11.1% year-on-year growth. The company achieved an EBITDA of ₹37.8 crores, with the EBITDA margin improving to 12.6%, which is higher than the previous quarter. Net profit for the quarter stood at ₹24 crores, translating to a PAT margin of 8%. Despite the profit growth, EPS remained flat at ₹0.42 due to the full conversion of FCCB round 1 into equity, increasing the total number of shares.
H1 FY26 Consolidated Performance
For the first half of FY26, Kellton Tech recorded a consolidated revenue of ₹597 crores. EBITDA for H1 FY26 was ₹73 crores, with an EBITDA margin of 12.3%. The net profit for the six-month period reached ₹46.8 crores, and the PAT margin was 7.8%. The EPS for H1 FY26 was ₹0.90.
Strategic Project Wins and Operational Highlights
The company successfully implemented a next-generation integration platform for a global food services company across 10 countries and over 1,500 stores. Kellton Tech also played a key role in powering a leading OTT platform for the Asia Cup live streaming, demonstrating expertise in cloud-native engineering and low-latency streaming. Additionally, a new taxation platform for a Big Four consulting company went live, and the company signed an MoU for a human-centric AI ecosystem under the EU-India Framework Agreement.
New Client Acquisitions and Service Expansion
Kellton Tech partnered with a global packaging solution provider to expand its intelligent payment processing framework internationally, starting with the Netherlands. They were empaneled as a key technology partner by a global logistics provider, initiating offshore IT support services with plans to expand into AI-driven initiatives. New engagements also include a U.S. consumer finance company for AI-driven operational efficiency and a healthcare AI company for risk adjustment solutions, alongside a large-scale digital transformation for an engineering and industrial enterprise.
Capital Allocation Strategy: Focus on Acquisitions
The company is undertaking fundraising, including a $10 million FCCB round already deployed and a new FCCB round, with the biggest chunk earmarked for opportunistic acquisitions. These funds are also allocated for IP building, working capital, and increasing market reach. Management aims to deploy acquisition funds within a year, focusing on acquiring companies for their technology capabilities or customer base rather than just revenue.
Acquisition Margin Targets and Integration Plan
Kellton Tech acknowledges that acquired deep tech companies may initially have minimal or single-digit EBITDA margins. However, the company's target is to improve these margins to 20% EBITDA within six months to a year post-acquisition. This improvement will be driven by leveraging Kellton's existing capabilities, optimizing overheads, and realizing economies of scale.
Geographic Expansion and Diversification
To mitigate risks associated with market concentration, Kellton Tech is actively pursuing geographic diversification. While Europe, a focus area, is experiencing a recession, the company sees growth opportunities in Canada, Asia Pacific, and the Middle East. Management expressed confidence in the American market despite ongoing speculations, noting that H1-B visa rules are becoming easier, and Canada is actively welcoming H1-B talent.