KDDL Limited: Navigating Global Headwinds with Strategic Growth in Q2 & H1 FY26

KDDL Limited, a prominent player in precision manufacturing and luxury goods, has demonstrated a resilient performance in the second quarter and first half of fiscal year 2026, despite a challenging global economic environment. The company's strategic diversification and proactive market approach have enabled it to achieve significant top-line growth, even as the global Swiss watch market experiences a slowdown. For Q2 FY26, KDDL reported a standalone total income of INR 126.8 crores, marking a robust 30% year-on-year increase. The H1 FY26 standalone total income reached INR 241.6 crores, growing by 32.5% compared to the previous year. On a consolidated basis, the company's total income for H1 FY26 crossed the INR 1,000 crore mark, settling at INR 1,007.9 crores, a substantial 29.2% year-on-year growth. This performance underscores KDDL's ability to adapt and expand its operations amidst fluctuating market dynamics.

The company's growth has been significantly bolstered by its diversified business segments. The Precision Engineering division, operating under the Eigen brand, has been a standout performer, delivering an impressive 44% year-on-year revenue growth in H1 FY26. This segment specializes in high-precision components for critical sectors such as automotive, aerospace, electronics, and industrial applications. Management attributes this robust growth to healthy demand from export markets, coupled with KDDL's technical excellence and niche manufacturing capabilities. The bracelet business also continues to expand as planned, achieving over 80% capacity utilization and contributing positively to the watch component portfolio. Furthermore, the Ornamental Packaging (Ornapac) division, though on a smaller base, recorded an exceptional 70% year-on-year revenue growth in H1 FY26, highlighting its potential as a strategic growth pillar.

Strategic Adaptations and Future Outlook

KDDL's management has demonstrated a clear strategic vision to counter the prevailing market challenges. Recognizing the slowdown in the traditional Swiss watch market, the company is actively exploring opportunities in non-Swiss watch markets, particularly in Europe and other Asian regions. This initiative aims to diversify its customer base and strengthen its geographic presence, reducing concentration risk and opening new avenues for growth. The company's luxury watch brand, Favre-Leuba, is also exceeding its sales targets, with initial budgeted losses expected to be significantly lower than anticipated. Global distribution for Favre-Leuba is expanding, with new points of sale being established across India, the Middle East, Europe, and the U.S., especially after the moderation of U.S. tariffs on Swiss watches.

To support its growth trajectory, KDDL is undertaking strategic investments. The company plans to invest INR 15-18 crores in capital expenditure during H2 FY26. A significant initiative includes expanding its in-house electroplating capacity for the Precision Engineering division, which is expected to be operational by Q1 FY27. This expansion is crucial for enhancing efficiency and capability to serve new customers with larger, more complex orders, reinforcing KDDL's position as a single-stop solution provider. Furthermore, the company is exploring export opportunities for its packaging products, targeting global luxury brands seeking sustainable and differentiated solutions.

Profitability and Long-Term Vision

While the top-line growth has been robust, KDDL's profitability has experienced some shifts. Consolidated EBITDA for H1 FY26 stood at INR 166.8 crores, a 17.5% year-on-year growth, with margins at 16.5%. Standalone EBITDA for H1 FY26 was INR 54.3 crores, up 20.5%, with margins at 22.5%. The management attributed the slight moderation in overall profitability to a changing product mix and the front-ended expenditures associated with scaling up the new packaging and bracelet units. These new ventures require initial investments before reaching full capacity utilization and optimal profitability.

KDDL's management maintains a confident long-term outlook. The company expects its Precision Engineering business to grow at 20-25% on a long-term basis. Overall, KDDL anticipates a similar growth rate of 20-25% for the entire business over the next several years. The company has reaffirmed its previous long-term targets, aiming for the Eigen business to achieve INR 750-1,000 crores in revenue within 7-10 years, and the bracelet and packaging businesses to reach INR 80-100 crores in 3-5 years. This commitment to long-term targets, coupled with ongoing strategic investments and market diversification, reflects KDDL's disciplined approach to sustainable growth.

Conclusion

KDDL Limited's Q2 and H1 FY26 performance showcases a company effectively navigating a complex global economic landscape. Through strategic diversification, robust growth in key segments like Precision Engineering, and proactive expansion into new markets and product lines, KDDL is building long-term strength. The management's focus on operational efficiency, capacity enhancement, and brand building, particularly with Favre-Leuba, positions the company for sustained growth. Despite short-term pressures on profitability from new initiatives, KDDL's reaffirmed long-term targets and strategic clarity instill confidence in its future trajectory, making it a compelling case study in resilient growth within the Indian manufacturing sector.