Kaynes Technology FY26: Strong growth, but smart metering working capital dominates the discussion

Kaynes Technology ended FY26 with another year of strong revenue and EBITDA growth, even as the quarter closed with a sharper debate around execution timing and cash conversion. On a consolidated basis, revenue from operations rose 33.2 percent year on year to INR 3,626.4 crore. EBITDA grew 39.8 percent to INR 574.1 crore, taking EBITDA margin up to 15.8 percent. Profit after tax increased 24.0 percent to INR 363.9 crore, though PAT margin moderated to 10.0 percent.

The company also reported an order book of INR 8,366.3 crore as of March 2026, up from INR 6,596.9 crore a year earlier. Management framed FY26 as a period of consolidation while the company scales new platforms like OSAT and PCB alongside the core EMS business.

But the year also highlighted the cost of scale. Net working capital days moved up to 125 days from 87 days in FY25, and operating cash flow turned sharply negative at INR 600.4 crore. In the earnings call, management attributed the bulk of working capital stress to the smart metering subsidiary’s execution model, where payments are linked to installation and government processes.

FY26 performance: growth continues, Q4 margins soften

FY26 results show Kaynes continuing to grow faster than many traditional manufacturing peers, supported by a diversified vertical mix and deeper customer engagement. Industrial including EV remained the largest vertical at 55 percent of FY26 revenue, while automotive contributed 25 percent. Railways was 6 percent and IoT, IT and others contributed 10 percent.

Q4 FY26, however, showed margin pressure. Revenue increased 26.2 percent year on year to INR 1,242.6 crore, but EBITDA grew only 15.4 percent to INR 193.7 crore, pulling EBITDA margin down 150 basis points to 15.6 percent. PAT declined 21.5 percent year on year to INR 91.2 crore, and PAT margin fell to 7.3 percent.

The profit and loss statement points to a steep rise in depreciation and amortization in Q4, and a 38.7 percent increase in finance cost. For a company in an expansion phase, this combination is not unusual, but it does tighten near term earnings quality.

Working capital and cash flow: the metering subsidiary takes center stage

The biggest investor concern in FY26 was not revenue growth, but cash conversion. The company reported negative operating cash flow of INR 600.4 crore for FY26. Balance sheet movements show trade receivables rising sharply to INR 1,527.6 crore, and receivable days expanding to 134 days.

On the earnings call, management made a clear distinction between the core EMS business and the metering subsidiary. The Managing Director stated that on a like to like basis, core EMS working capital days improved to 53 days in FY26, while the consolidated working capital metric deteriorated due to the metering business.

Management quantified the smart metering subsidiary’s scale and stress. It stated metering revenue was around INR 971 crore in FY26, roughly 24 to 25 percent of consolidated revenue. At the same time, metering receivables were about INR 1,365 crore, with collections linked to installation progress. Management also indicated that securitization has started with a bank, but discounting so far was only around INR 40 crore.

This framing matters because it explains why consolidated working capital expanded even as management claims operational improvement within core EMS. Still, from an investor perspective, the consolidated outcome is what drives liquidity and valuation, and FY26 clearly shows the risk of mixing long cycle, government linked execution models with an otherwise faster moving EMS business.

The company also indicated it would avoid taking new orders under the older metering model, and instead focus on supplying meters while project teams handle installation. This is a direct course correction in response to the cash cycle issues seen in FY26.

Strategy and expansion: OSAT and PCB are the next levers

Kaynes is attempting to move beyond conventional EMS by adding backward integration into PCB manufacturing and vertical integration into OSAT. The investor presentation outlines an OSAT facility at Sanand through Kaynes Semicon, with a pilot line already operational and Unit 2 expected to be operational by July 2026. The OSAT roadmap includes packages such as QFN, TO, BGA, flip chip BGA and advanced 2D, 2.5D and 3D concepts.

On PCBs, the company has Kaynes Circuits in Chennai with planned manufacturing for multilayer rigid and rigid flex, HDI PCBs, and flexible PCBs. The presentation notes PCB Unit 1 is expected to be operational by July 2026.

During the concall, management emphasized that these platforms are strategic and that it is still evaluating how much capacity will be consumed internally versus sold externally. It also commented on first year expectations for these segments, with PCB around INR 300 to 400 crore and OSAT around INR 250 to 300 crore, while clarifying that earlier higher market numbers were not formal guidance.

Alongside these new platforms, Kaynes continues to expand manufacturing capacity in India. The presentation highlights Chamarajanagar expansion with a phased built up area and a Class 10K clean room, and Hyderabad expansion including an upcoming 150K sq ft plant.

Takeaways: a strong business, but execution consistency is the focus

Kaynes finished FY26 with strong growth, a larger order book, and a strategic push into higher value electronics manufacturing platforms. Net debt reduced materially, suggesting the balance sheet is not constrained by leverage.

At the same time, FY26 underscored that scaling into product linked and project execution models can materially change cash flow dynamics. Investors on the concall strongly challenged management on guidance credibility and cash flow outcomes. Management acknowledged the miss, linked the disruption to project delays and geopolitical events, and communicated a shift in approach for future guidance, leaning more on relative growth targets than absolute revenue numbers.

The next few quarters are likely to be judged on three measurable themes: stabilization of metering receivables through faster installation and collections, evidence of OSAT and PCB ramp up as promised in the July 2026 timeline, and improved predictability in quarterly revenue and margin delivery. If Kaynes can show progress on these, the FY26 stress around cash conversion may be viewed as a difficult transition year rather than a structural problem.