# 1. Financial Performance ## A. Key Figures * **Total Revenue:** **₹6,735 Mn** consolidated (+34%) * EBITDA: ₹1,130 Mn consolidated (+69%) · EBITDA Margin: 16.8% (+350 bps) * **PAT:** **₹74.6 Cr** consolidated (+47%) · **PAT Margin:** **11.1%** * ROE / ROCE: 15.4% / 13.7% ## B. Revenue Growth * **Growth Below Guidance:** Top-line expansion at strong double-digit pace, though short of expectations due to **automotive segment slowdown** (mid-20s growth). ## C. Profit Margins * **Robust Margin Expansion:** EBITDA margin improved significantly, driven by **favorable business mix**, **gross margin gains across all verticals**, and **operating leverage**. * **ODM Leverage Enhances Margins:** ODM share doubled to **20% of sales**, improving bill-of-materials control and design-led cost optimization. * **Segment-Level Strength:** Industrial segment delivered sharp margin gains; automotive and EV margins rose on cost reductions and stable pricing. ## D. Cash Flow Trends * **Positive OCF Outlook:** Operating cash flow expected to be meaningfully positive in FY'26, supported by resolution of legacy receivables in H1. --- # 2. Order Book & Demand ## A. Key Figures * **Order Book:** **₹74,011 Mn** (Q1 FY26) (+47.3% YoY) · **₹50,386 Mn** (Q1 FY25) * **Sales Trajectory:** **Month-on-month sales growth** with **June sales particularly high** ## B. Book Value Growth * **Robust Year-Start Momentum:** Order book reaches ₹710 Cr, reflecting strong YoY expansion and a healthy demand base entering the fiscal year. ## C. Sector-wise Inflows * **Pipeline Expansion:** Execution momentum reinforced by MoUs with **four additional clients**, signaling broadening client acquisition beyond existing major wins. ## D. Monthly Order Trends * **Growth Visibility:** EMS business on track to exceed **INR1,000 crores** in Q2, supported by planned Canadian integration from August. * **Demand Resilience:** Management dismisses base effect concerns, citing stable underlying demand via **3-month moving average** and broad sectoral participation. --- # 3. Capacity & Production ## A. Key Figures * **Capex Spent:** **₹313 Cr** OSAT (+ **₹443 Cr** balance) · **₹114 Cr** PCB ## B. OSAT Facility Progress * **Sanand OSAT on Fast Track:** First building and design office completion set for **first week of August**, with proto product development underway for AOS. * **Accelerated Commercial Timeline:** Phase 09 operations to begin by **September**, with commercial shipments expected in **Q4**, potentially ahead of schedule. * **Full Ramp-Up Target:** Full commercial operations for the OSAT facility expected by **December 2025**, supported by customer approvals anticipated in FY'26. ## C. PCB Plant Readiness * **Chennai HDI PCB Plant Nearing Launch:** Construction complete, in final stages with **operational readiness targeted for January 2026**. * **Revenue Initiation Imminent:** PCB plant set to commence operations in **early next year**, aligning with client onboarding plans. ## D. Capex Deployment * **Strategic Vertical Integration:** Sanand OSAT and Chennai PCB facilities central to delivering **end-to-end electronics manufacturing solutions in India**. * **Funding Execution:** OSAT and PCB capex deployment progressing in line with construction milestones and QIP fund allocation. --- # 4. Product & Segment Mix ## A. Key Figures * **Gross Margin:** 28% stand-alone (₹450 Cr rev) · ~68% subsidiaries (₹220 Cr rev, ~₹150 Cr GP) * **Sales Mix Guidance:** **~8%** aerospace · **10–12%** railway (by year-end) * **Smart Meter Target:** **₹1,000–1,200 Cr** annual revenue potential (~15% market share) * **Aerospace Orders:** **$10 Mn initial orders** each from two major clients ## B. Vertical-wise Sales * **Strategic Transformation:** Kaynes is evolving from EMS to **integrated ESDM player**, assuming greater product lifecycle ownership and positioning as a **strategic thought partner** with capabilities in embedded systems, prototyping, and system integration. * **Margin Divergence:** Subsidiaries generate significantly higher gross profit due to **premium product mix and vertical selection**, with **stronger margins in U.S. operations**, particularly on low-volume, high-tech products. * **Growth Verticals:** Aerospace and railway are scaling strategically, with **Kavach project in pilot phase** using German tech and partnerships, and routine orders expected post-clearance. ## C. Smart Meter Target * **Stable Revenue Stream:** Smart metering delivers **non-cyclical, execution-driven revenue** through consistent order fulfillment and deployment, with commercial rollout imminent post-regulatory approval. * **Market Ambition with Discipline:** Targeting **15% market share** and ₹1,000–1,200 Cr revenue, but intentionally limiting exposure to avoid overdependence on a single segment. ## D. EV & Aerospace Growth * **Aerospace Momentum:** Emerged as **top growth driver** this year, securing **two $10 Mn+ initial orders** from major clients, with cross-divisional engagement and revenue ramp expected in H2. * **EV Segment Dynamics:** **2-wheeler EV** leads current traction with new customer wins, while **4-wheeler EV** momentum awaits standardization; strong progress in customer acquisition across EV, auto, and industrial segments in Q1. * **Advanced Tech & OSAT Play:** Collaboration with well-funded unlisted clients in **silicon photonics** is boosting **advanced packaging demand**, while OSAT output supports **import substitution** but will be largely exported due to global supply chain integration across **72 countries**. * **Future Margin Levers:** Margin expansion anticipated from ramp-up of **higher-margin offerings**, including multilayer HVPC boards and semiconductor assemblies. --- # 5. M&A & International Expansion ## A. Key Figures * **Investment in Railway ODM Company:** **INR 40 Cr** * Minority Investment: In Mixx Technologies, now significantly appreciated more than a year after investment ## B. Canada Acquisition * **Strategic North American Foothold:** Acquisition of **August Electronics Canada** expands manufacturing reach and unlocks access to **high-margin global clients**, enhancing presence in a key growth market. * **Portfolio & Capability Build:** Minority stake in **Mixx Technologies** bolsters advanced packaging capabilities, with near-term prototype launch and collaboration with **NVIDIA, Meta, and Google** validating technological relevance. * **Railway Sector Inorganic Growth:** Strategic acquisitions of **Sensonic** and a railway ODM firm reinforce vertical integration and market positioning in regulated, high-barrier sectors. ## C. North America Strategy * **China-Plus Alternative:** Canada-India corridor positioned as a **resilient, flexible sourcing alternative** to China, leveraging proximity and reliability to attract global clients. * **Geographic Diversification Momentum:** OSAT initiative secured **three marquee clients** across the U.S., India, and Germany, establishing a globally balanced demand base. * **Targeted Inorganic Expansion:** North America flagged for **major acquisitions**, while Europe targeted for **ODM design talent** in industrial and railway verticals to deepen solution offerings. * **Phased Market Entry:** Growth via "nibble-to-big-meal" investment approach allows de-risked scaling and design-led market penetration. ## D. Partner Equity Model * **Aligned Incentives via Skin-in-the-Game:** Strategic partners receive **minority equity stakes** (up to 25%) in subsidiaries, tied to equipment/material contributions, ensuring long-term alignment and business transfer. * **Controlled Dilution, Maximum Leverage:** Total partner ownership capped at **less than 20%**, preserving control while unlocking capital-efficient growth and partner-driven client acquisition. * **Equity as Growth Catalyst:** Partners invest at **fair but low valuations**, creating upside incentive; appreciation drives voluntary migration of profitable businesses into Kaynes’ ecosystem. * **Capital Allocation Priority:** Despite flexibility for debt reduction, management emphasizes **inorganic growth** as the primary use of capital, supported by omnibus investment mandate. --- # 6. Working Capital & Liquidity Risks ## A. Key Figures * Net Working Capital Days: 132 in Q1 FY26 (vs. 87 in FY25) · sub 70 normalized (excluding one-time items) * **Inventory Days:** **115** in Q1 FY26 (+2 YoY) ## B. Receivables Spike * **One-Time Distortion:** Q1 working capital spike largely driven by **₹350 Cr non-operational receivables** from a subsidiary acquisition, expected to resolve via financing in H1 FY26. * **Underlying Efficiency Improving:** Excluding one-time items, the company is already operating at **~70 net working capital days**, in line with FY26 target, reflecting strong progress in receivables and inventory management. * **Seasonal & Structural Drivers:** Higher receivables also reflect **uneven quarterly sales distribution**—post-March demand pull-in led to muted April and elevated May-June billing, creating a natural Q1 spike. * **Core Receivables Growth:** Despite normalization efforts, **core receivables rose significantly**, signaling volume growth and client onboarding in high-value sectors, now being managed via **without-recourse factoring**. ## C. Inventory Build-up * **Proactive Inventory Build:** Inventory days increased in preparation for **seasonally stronger Q2**, with expected revenue **₹1,000 Cr higher than Q1**, aligning with cyclical industry trends. * **Supply Chain Collaboration:** Inventory management improved through **local supplier stocking** and operational enhancements, reducing funding pressure and improving turnover efficiency. ## D. Factoring Solutions * **Structural Working Capital Fixes:** Implementation of **supplier-managed inventory, demand forecasting, and production scheduling** to sustainably optimize capital efficiency, with full benefits expected by H1. * **Factoring Expansion:** **Without-recourse factoring** being rolled out with new aerospace and high-value clients to insulate balance sheet from receivables growth. --- # 7. Guidance & Outlook ## A. Key Figures * **Revenue Guidance:** **₹4,500 Cr** consolidated (FY26) · **₹4,250 Cr** EMS/ESDM · **₹100 Cr** OSAT · **₹175 Cr** Canada acquisition ## B. Revenue Target * **Guidance Retained:** Full-year revenue and margin outlook unchanged, with catch-up expected in upcoming quarters despite lack of explicit FY27–28 quantification. * **Growth Diversification:** Revenue mix reflects strategic diversification, with contributions from new OSAT operations and recent Canadian acquisition enhancing scale. ## C. Margin Expectations * **Strong Margin Momentum:** Q1 EBITDA margin significantly above guidance, with management expecting **8%–17% range to persist or improve** through the year. * **Broad-Based Expansion:** Anticipated **200 bps gross margin improvement** across all sectors, supported by operational leverage and volume growth in high-margin verticals like railways and aerospace. * **No Formal Upgrade, But Upside Likely:** While no official margin guidance revision, current trends suggest potential outperformance relative to prior expectations. ## D. FY26 Confidence * **Strategic Execution Driving Confidence:** Management reaffirms outlook based on accelerating growth, robust order book, and proven execution capability.