KDDL Q4 FY26: Strong growth, but management stays cautious on global demand

KDDL Limited closed Q4 FY26 with a sharp improvement in standalone profitability and strong topline growth across both standalone and consolidated reporting. On a standalone basis, total income rose to INR 145.3 crore in Q4 FY26, up 42.0 percent year on year. EBITDA nearly doubled to INR 36.4 crore, up 87.6 percent, with an EBITDA margin of 25.1 percent. For FY26, standalone total income was INR 506.0 crore, up 31.9 percent, and EBITDA increased to INR 116.9 crore, up 32.2 percent.

Consolidated performance also remained strong. Total income was INR 584.7 crore in Q4 FY26, up 35.6 percent, and INR 2,207.8 crore for FY26, up 30.3 percent. EBITDA for FY26 was INR 363.2 crore. However, consolidated profitability grew slower than revenue. FY26 consolidated PBT increased 3.2 percent to INR 195.7 crore, while PAT declined 5.0 percent to INR 135.2 crore.

A key message from management was that these results were delivered in a volatile global environment. The Chairman highlighted weak consumer demand in key luxury markets, particularly China and certain parts of Europe, and cautious procurement decisions by global brands. Yet, the company pointed to improving traction in the second half of FY26 and said it remains confident about the medium-term opportunity as customers increasingly value supply-chain diversification, reliability, and long-term partnerships.

FY26 financial snapshot: standalone strength, consolidated margin pressure

The standalone business showed a strong recovery in Q4 and stable full-year margins. Standalone gross margin was 74.9 percent in FY26, with EBITDA margin holding at 23.1 percent for the full year. In Q4, standalone margins expanded as EBITDA margin reached 25.1 percent.

At a consolidated level, margins were lower and declined year on year. FY26 consolidated EBITDA margin was 16.4 percent versus 18.1 percent in FY25. Consolidated PAT margin fell to 6.1 percent from 8.4 percent in FY25.

Note: Presentation mentions a statutory impact on consolidated PBT owing to labor codes of INR 2.45 crore.

Segment commentary: watch components stabilise, Eigen scales, Ornapac ramps up

Management commentary provided selective segment revenue datapoints excluding Ethos from consolidated numbers. The CFO stated that manufacturing watch components reported revenue of about INR 240 crore in FY26 compared to INR 200 crore in FY25, registering around 20 percent growth. He also clarified that bracelets are separate from this number, with bracelet revenue around INR 40 crore.

For the Precision Engineering division, Eigen, management described FY26 as an extremely successful year. The Chairman stated revenue grew more than 35 percent year on year to around INR 200 crore, supported by export momentum and growing customer confidence. Management also emphasised that Eigen is a capability-led business and that it does not want the investment case to be reduced to one product line.

Ornapac, the packaging division, also showed strong growth on a small base. The CFO said Ornapac revenue increased to around INR 23 crore in FY26 from around INR 17 crore in FY25, a growth of about 37 percent. The company said initial supplies to international brands sourcing packaging for the Indian market have commenced, and response has been encouraging. However, management acknowledged the division is loss making at the ramp-up stage and expects it to become profitable in the second half of the current financial year.

Investments and capacity building: FY27 capex and operational priorities

From a capital allocation standpoint, management guided to capex of approximately INR 50 crore in FY27 across the standalone businesses. This includes maintenance and growth capex and is aimed at strengthening capabilities and improving efficiencies across watch components, bracelets, precision engineering, and packaging. Management clarified this does not include investments by subsidiaries such as brand-related spending for Favre-Leuba.

On Eigen, the CFO said the capex initiated last year remains in progress, and the backward integration of plating processes is expected to be commissioned in the next three to four months. Management said this is intended to improve quality consistency and support volume ramp-up.

On bracelets, management stated capacity utilisation on existing capacity was about 75 to 80 percent during FY26 and that it is adding capacity and capability incrementally. The Chairman also provided an indicative capacity expansion outlook, stating the company expects to expand from about 75,000 units to about 110,000 to 120,000 over the next 12 months.

The company also highlighted a strategic advantage for bracelets. Management said bracelets are not covered under the Swissness criteria, which supports the long-term case for manufacturing bracelets in India for global customers.

Outlook: stability in H1 FY27, better visibility in H2

Management maintained a cautious tone on the near-term export environment. The Chairman said H1 FY27 is expected to remain relatively stable for export-oriented businesses, with growth more visible in the second half of the year. For domestic demand, management sounded more optimistic, citing premiumisation, localisation opportunities, and healthy demand.

The company also spoke about customer diversification beyond Switzerland. Management said it has intensified efforts beyond Switzerland, noting watchmaking activity and revival in markets such as Germany, France, the UK, and the US, and said it is not present in Japan yet.

For growth expectations, management indicated that in the medium to long term it expects precision engineering and bracelets to grow at around 25 percent CAGR, while watch components may grow somewhat lower, depending on macro conditions.

Favre-Leuba: global rollout narrative, but limited numbers

The management also discussed Favre-Leuba under Silvercity Brands, a Switzerland-based entity. The Chairman stated that by end of FY26 Favre-Leuba was present in over 20 countries with more than 80 points of sales, with sales better than expected and stores short of stock. Management said it is ramping up production and expects to more than double sales in FY27 with new launches and a broader global footprint. The company did not disclose the current size of Favre-Leuba, calling those figures confidential.

Key takeaways

KDDL delivered strong FY26 growth and a sharp improvement in Q4 standalone margins, while maintaining a cautious view on global luxury watch demand in the near term. The strategy is centred on capability expansion, customer diversification, and scaling newer verticals such as bracelets, Eigen, and Ornapac. Investors will likely track three near-term execution markers: commissioning of Eigen’s backward integration, Ornapac’s path to profitability in the second half of the current year, and whether export components see the second-half pickup that management expects in FY27.