Kaynes Technology: Navigating Growth and Strategic Shifts in Q2 & H1 FY26

Kaynes Technology India Limited, a prominent player in the Electronic System Design and Manufacturing (ESDM) sector, has reported a robust financial performance for the second quarter and first half of fiscal year 2026. The company's Q2 FY26 revenue surged by 58% year-on-year to INR906.2 crore, while the first half (H1 FY26) revenue grew 47% to INR1,579.7 crore. This impressive top-line growth was complemented by a significant expansion in profitability, with Q2 EBITDA increasing by 80% to INR148 crore, and H1 EBITDA rising by 75% to INR261 crore. The EBITDA margins expanded by 190 basis points in Q2 and 270 basis points in H1, reflecting operational efficiencies and strategic initiatives.

Management emphasized the company's successful transformation from a traditional Electronic Manufacturing Service (EMS) provider to a fully integrated ESDM company. This strategic shift involves backward integration into high-density interconnection Printed Circuit Board (PCB) manufacturing and vertical integration into OSAT (Assembly Testing Packaging) and semiconductor packaging. These moves are designed to streamline production processes, enhance supply chain control, and unlock margin-accretive opportunities. The company's Sanand OSAT facility recently achieved a significant milestone by delivering India's first commercially manufactured multichip module, the IPM5, in collaboration with Alpha & Omega Semiconductor. This achievement underscores Kaynes Technology's growing capabilities in high-value semiconductor manufacturing and its contribution to India's self-reliance in the electronics sector.

Financial Performance Snapshot (INR Crore)

Diversified Revenue Streams and Strategic Expansions

Kaynes Technology's revenue diversification across various high-growth verticals continues to be a key strength. For H1 FY26, the industrial sector, including Electric Vehicles (EV), was the largest contributor at 59% of total revenue, followed by automotive at 24%. Other significant segments include aerospace, outer-space & strategic electronics (7%), IoT/IT, consumer, and others (7%), medical (1%), and railways (2%). The company is actively working to increase its presence in railways, aerospace, and defense, aiming for double-digit contributions in these sectors in the coming years. This broad exposure helps mitigate risks and capitalize on diverse market opportunities.

In terms of segments, OEM - Turnkey – Box Build accounted for 22% of H1 FY26 revenue, OEM - Turnkey – PCBA for 30%, and ODM & Prod. Eng. and IoT solutions for 48%. The company's focus on Original Design Manufacturing (ODM) solutions, particularly in smart devices, IoT, brushless drive technology, and Gallium Nitride technology, is expanding. The acquisition of Mustard further strengthens its capabilities in the AR/VR space, positioning Kaynes Technology at the forefront of emerging technologies.

Capital Allocation and Future Outlook

Kaynes Technology is also making significant strides in its PCB manufacturing expansion. The company has received government approval for advanced PCB manufacturing projects, including a multilayer HDI PCB facility in Chennai. Phase 1 of this project in Oragadam is expected to be ready by the end of the current year, with shipping commencing from April onwards. This expansion aims to reduce India's dependence on imported inputs, enable domestic value addition, and capture a substantial share of the global PCB market, which is projected to cross USD100 billion by 2030. The company anticipates significant cost reductions for its internal PC board usage through this initiative.

Despite the strong growth, the company acknowledged some challenges, including not meeting its quarterly guidance and an increase in receivables and working capital, which led to a negative operating cash flow in Q2 FY26. Management attributed this to a skew in billing towards the end of the quarter and supply chain glitches. However, they are implementing measures such as discounting receivables and optimizing inventory through vendor-managed inventory programs to improve cash flow by year-end. The management is confident in achieving its annual profit and EBITDA targets.

Segment Contribution (H1 FY26)

Kaynes Technology's Q2 and H1 FY26 performance reflects a company in a dynamic growth phase, strategically expanding its capabilities and market reach. While operational challenges related to working capital and short-term guidance need addressing, the long-term vision, supported by significant investments in OSAT and PCB manufacturing, positions the company for sustained growth and leadership in the evolving ESDM landscape. The management's focus on operational excellence, digital transformation, and diversified revenue streams underscores its commitment to building a globally respected technology enterprise.