OSEL Devices

OSEL Devices Limited delivered robust financial results for H2 FY26, with revenue growing 56.9% to ₹292.7 crores. EBITDA expanded by 57.9% to ₹53.3 crores, achieving a margin of 18.2%. Profit after tax also saw significant growth, increasing by 45.7% to ₹29.2 crores. This strong performance was broad-based, with all three key verticals—LED display, hearing aids, and mobile devices—contributing positively to the growth.

The company emphasizes its unique position with full ownership of the value chain, from R&D to clinic-led retail. OSEL holds critical certifications like US FDA, ISO 13485, and CDSCO MD5, which enable recurring revenue streams through its proprietary CMS platform and SFL clinic network. Management highlighted a strategic shift towards higher-value endpoints in each vertical, aiming to enhance both top-line growth and EBITDA margins over the next four to five years.

A significant future growth driver is the upcoming JNPA SEZ hub, expected to be commercialized from April 2027. This facility will substantially increase OSEL's export capabilities and OEM capacity, leveraging India's business port and SEZ tax benefits. The company aims to target international markets, particularly in North America, the Middle East, and Africa, with its LED products, capitalizing on the 'China plus one' manufacturing trend. The Letter of Intent (LOI) for the project has been received, and detailed capex figures are currently being worked out.

The acquisition of SFL, a network of audiologist clinics, is pivotal for OSEL's entry into the high-margin retail segment of hearing aids. While current sales to government segments yield lower margins (₹2,500-₹3,000 per unit), the retail model through SFL is expected to achieve significantly higher realizations (₹35,000-₹40,000 per unit). This shift is anticipated to substantially boost profitability, tapping into India's largely underserved hearing aid market, where penetration is currently less than 3%.

OSEL, licensed to manufacture Philips-branded mobile phones, has successfully entered the smartphone market since March, building on its initial success with feature phones. In FY26, the company sold over 4.5 lakh feature phones. While manufacturing is currently outsourced, OSEL plans to establish its own manufacturing setup once sufficient scale is achieved. This segment is projected to experience significant growth in the coming year, contributing substantially to the company's top line.

The company reclassified short-term borrowings from operating to financing activities in its FY25 cash flow statement to correct prior erroneous reporting. Interest costs 'almost doubled' in H2 FY26, primarily due to increased working capital limits and interest incurred on IPO funds parked in mutual funds, against which credit limits were drawn. Management is working to improve working capital utilization and reduce interest terms through instruments like LCs.

H2 FY26 revenue was negatively impacted by ₹25-30 crores due to logistics delays and electronic supply chain disturbances, partly attributed to geopolitical events. This deferred revenue, which would have been recognized in March, was pushed into April, contributing to a 'flattish' revenue performance in H2 compared to H1. The company expects to recover this in the subsequent period.