Q1 2027 Kaynes Technology India Ltd Earnings Call
Speaker #1: Ladies and gentlemen, good day, and welcome to Kaynes Technology's conference call. Please stay connected. The call will begin shortly. Participants, we have been connected to Kaynes Technology's conference call.
Speaker #1: Please stay connected. The call will begin shortly. Thank you. Ladies and gentlemen, good day, and welcome to Kaynes Technology India Limited Q1 FY27 Earnings Conference Call, hosted by Access Capital Limited.
Speaker #1: As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes.
Speaker #1: Should you need assistance during this conference call, please signal an operator by pressing star, then zero, on your touchscreen phone. Please note that this conference is being recorded.
Speaker #1: And I'll hand the conference over to Mr. Nikhil Kandur from Access Capital. Thank you, and over to you, sir.
Speaker #2: Thank you, Miro. Good morning, everyone. On behalf of Access Capital, I welcome you all to the Q1 FY27 earnings concall of Kaynes Technology India Limited.
Speaker #2: Today, we have with us the management, represented by Mrs. Savita Ramesh, Chairperson; Mr. Ramesh Kunikanan, Executive Vice Chairman; Mr. Muthukumar Naraswamy, Managing Director; and Mr. Jayaram Sampath, Full-time Director and Chief Financial Officer.
Speaker #2: Now, I'll hand over the floor to the management for the opening remarks, after which we will open the floor for Q&A. Thank you, and over to you, sir.
Speaker #3: Good morning, Nikhil. Thank you, Nikhil. Good morning to everyone, and thank you for joining us. On behalf of the Kaynes Technology team, I would like to welcome all of you to our Q1 FY27 earnings call.
Speaker #3: Joining me today are Mrs. Savita Ramesh, Chairperson of our Board; our Managing Director, Dr. Muthukumar Naraswamy; Mr. Jayaram Sampath, long-time Director and CFO; Mr. Sunit Verma from our Investor Relations; and MUFG IR, our investor relations partners.
Speaker #3: Let me begin with a brief overview of our financial performance for Q1 FY27. Our total revenue stood at INR 946 crore, reflecting a year-on-year growth of 40%, which is largely driven by the EMS business.
Speaker #3: EBITDA for the quarter was ₹147.6 crore, translating into an EBITDA margin of 15.6%, and representing 31% year-on-year growth. We have a robust order book of around ₹9,000 crore.
Speaker #3: Before I go further into the numbers, I want to spend a few minutes on something more important than any single quarter's performance, and that is the confidence you have placed in Kaynes—and our responsibility to earn it back.
Speaker #3: Quarter after quarter, through consistent delivery. Over the past quarters, our entire leadership team across strategy, finance, operations, and investor relations has worked with one shared priority: demonstrating our prowess to investors.
Speaker #3: Customers and partners, through visible measurable delivery rather than commentary, that focus comes directly from listening closely to you. Following our Q4 and full year FY26, several of you raised fair and direct questions on the gap between our stated aspiration and delivered performance.
Speaker #3: On the basis of our working capital normalization and the clarity of our communication, we took that feedback seriously, and it has shaped exactly how we have operated this quarter.
Speaker #3: Our two strategic growth engines, Kaynes Semicon and Kaynes Circuit, remain a key management focus. Like the rest of the industry, we saw some disruption this quarter from the escalation in West Asia affecting equipment imports and component logistics globally.
Speaker #3: Not specific to Kaynes, this led to minor timing slippage in our OSAT and PCB ramp-up schedule. We have responded with the same playbook that served us through past disruptions.
Speaker #3: We are diversifying logistics routes, building strategic inventory on critical components, and working closely with equipment vendors and adjusting to alternate schedules. Both Kaynes Semicon Unit 2 and Kaynes Circuit Chennai remain on track to be operational by Q3 FY27, and we will continue to update you transparently on our progress every quarter.
Speaker #3: In a few minutes, Dr. Muthukumar will take you deeper into the business, our core EMS performance, and other businesses. He will also cover the new customer recognitions this quarter, as well as our leadership and sustainability initiatives.
Speaker #3: August Electronics integration and overseas expansion, progress on OSAT and PCB, including a new international partnership and a marquee automotive opportunity, and our entry into space technology.
Speaker #3: He will close, as I will too, on why balance sheet strength is non-negotiable as we scale. Moving fast in a more competitive world—before I hand over, I want to spend a moment on something that sits above any single business line: that is, speed.
Speaker #3: The world we operate in—electronic semiconductors, EVs, and space technology—is moving faster than ever, and the competitive set we are up against in India and globally is intense.
Speaker #3: Moving with it being right is no longer enough on its own. We have to be right and fast. That means shortening the distance between a strategic decision and its execution on the ground.
Speaker #3: And it means building the muscle across engineering, supply chain, and program management to execute with precision, even as we move at pace. This is a discipline we are actively building into how Kaynes operates, not just something we aspire to.
Speaker #3: The domains where scaling into semiconductor packaging, PCB manufacturing, and space technology aren't just important to Kaynes. They are foundational to India's ambition in electronics and deep tech manufacturing, and being part of building that capability.
Speaker #3: This is something we take seriously. That said, there is a learning curve with this new stance, and we won't pretend otherwise. What we can commit to is this: we are learning quickly and converting those learnings into better execution the next time.
Speaker #3: And building the governance to make sure lessons learned in one part of the business don't have to be relearned in another. That combination—moving fast, executing with precision, and learning faster than the curve demands—is the standard we're holding ourselves to.
Speaker #3: With that, I would like to hand over the call to Dr. Muthukumar, our Managing Director, who will take you through our operational performance in greater detail.
Speaker #3: Thank you. Over to you, Muthukumar.
Speaker #1: Thank you, Mr. Ramesh, and a very good morning to everyone. Thank you all for taking the time to join us today. Mr. Ramesh explained our revenue growth and EBITDA, how we have performed, and also what our strategic initiatives are.
Speaker #1: Achieving a 40% year-on-year growth in Q1, and looking at the numbers, this has specifically come with a reduction in the growth of the smart metering business as compared to Q1.
Speaker #1: We have taken the feedback of various stakeholders and, looking at the current situation of our balance sheet and rental agent, we have taken a conscious decision to grow more in the EMS business, which is our traditional and core business. We have de-grown in the smart metering business—not because we don't have capacity, not because we don't have business and orders, but we put our foot down, saying that we need to make collections first to make sure that we continue to supply.
Speaker #1: The current situation in the places where we are doing the installation of meters, due to the natural calamity of floods, has also impacted this. But keeping everything in line with our objective of bringing the balance sheet to a better shape, we degrew.
Speaker #1: But our team—the leadership team, the operating team—did an excellent job of growing in the EMS business. Standalone, the EMS business grew much, much higher than the 40% overall growth.
Speaker #1: There was promising top-line growth, we agree, but as Mr. Ramesh said, we at Kaynes and our Board of Directors don't look at it quarter to quarter, but with a long-term strategy.
Speaker #1: But when the growth is good, we also see the impacts on margin due to past escalation driven by global supply chain issues, and macro factors such as the rise in energy and crude prices, commodity prices, and forex movement.
Speaker #1: Which, in turn, led to a rise in commodity prices. We expect this could take a couple of quarters for profitability to normalize and return to the levels we had earlier committed to.
Speaker #1: Yes, Kaynes did well in the quarter, but this is due to the strategic initiative of understanding the market was going to go like this. The management team took a decision to pull forward and keep the materials ready.
Speaker #1: There is a sharp increase that's happening in the entire supply chain, which is leading to lead times for supplies extending to more than 6 to 8 months in some categories.
Speaker #1: And the management team has already taken the initiative to ensure that enough materials from the pipeline are available to take care of the business commitments for the future quarters.
Speaker #1: While one of the test teams that have been asked by you is, are we growing in the smart—in the EMS business? I have answered yes. Even when we have degrown in the smart meter business, we continue to grow on the EMS business.
Speaker #1: I'll talk to you about the smart meter business for a while before I go into new customers. Turning to the smart meter business specifically, growth here was flat to negative this quarter, compounded by an impact on installations due to the flood situation as explained earlier.
Speaker #1: In terms of working capital, even though the number of days has moved from 190 days for the quarter standalone, and if you take it on a 12-month rolling basis, it is about 163 days, I wanted to emphasize that in terms of the EMS business, the teams did a good job.
Speaker #1: If you look at the total sales of about ₹942 crores, the revenue that has come from the EMS business is ₹840.54 crores—that is including GST—and the team did a remarkable job of collecting ₹847 crores, thereby ensuring one of the highest collections for this in this quarter.
Speaker #1: However, the sales in our Group Plus, which is the metering business, is about ₹240 crores, whereas our collections are ₹88 crores. This is what made us take a decision to stop production and supplies, which will result in a reasonably better cash flow.
Speaker #1: Having said that, we have taken up at all levels in the group test business, and though late, we have got about 200 crores of money in the first week of July, which gives us the confidence that whatever the commitment that we have given to you as a leadership team, that by the end of the financial year, we'll turn the cash positive, we're pretty confident on this.
Speaker #1: Though our inventory levels in terms of working capital have gone up by about ₹150 crore, as I said, this is a strategic decision that we took in the month of February, looking at the global market situation and the volatility.
Speaker #1: Just because our team has added upon the inventory there, we were able to successfully grow at 40% plus overall, and the EMS business alone at about 48%.
Speaker #1: This inventory increase has helped us, and this will also take us to the next level. We also talked to you earlier about some delayed delivery for a government product.
Speaker #1: I'm happy to say that that business also helped us to come to some normalcy, and about 30% to 40% of the business has been executed in the last quarter.
Speaker #1: As you can see, there's increased growth in the various segments, which we'll talk about. Going forward, we'll also be providing you with the rolling 12-month view of these metrics—on receivables, payables, or net working capital—rather than the quarterly average, so that you all get a picture of the long-term growth.
Speaker #1: On the existing business, I also wanted to bring it to your notice that the receivables from our leading electric vehicle two-wheeler customers—they are on most of your rights account—have come down significantly to below ₹100 crore, thanks to the continuous efforts of management in working like a partnership with the customers to bring back the money that we have.
Speaker #1: Having talked about the balance sheet, as Mr. Ramesh, our Executive Vice Chairman, said, we strongly believe that the P&L is very important, but the balance sheet is very clean.
Speaker #1: So, going forward, we'll continue to spend and ensure that the team is working, making the balance sheet much, much better than what we are doing now.
Speaker #1: Moving into the new business, let me talk about the new business and logos that we added to our portfolio, along with an update on existing logos and their impact on our business going forward.
Speaker #1: We added one of India's second-largest two-wheeler electric vehicle manufacturers to our existing EV portfolio. The team did a remarkable job of completing the product development and testing in a record time of about eight months, and now we have started serial supplies to this.
Speaker #1: Along with this, we have onboarded global brands from Germany and France, one of India's leading wireless communication companies, and a handful of other new logos together.
Speaker #1: Both our automotive team and non-automotive team are doing an excellent job of bringing more in a quarter of about 90 days, and wherein we had a working date of 75, we had more than 72 customers who have walked into our company, which talks about the customer confidence in our company.
Speaker #1: I'm pleased to share that one of the biggest achievements this quarter was receiving an all-round performance award from our major customers, which includes Mahindra, and that too for quality and overall commitment to development.
Speaker #1: We got a Best Award from Siemens, the Top Supplier Recognition Award, and of course, the Development Partner Excellence Award, which gives them confidence to tell how our customers believed in us.
Speaker #1: And of course, to make some more on the best delivery and development support. We also wanted to highlight Kaynes' commitment to building our next-generation leadership team.
Speaker #1: This quarter, we completed a full mapping of skills and capabilities for every individual across the organization, and we have begun a special training program to prepare high-potential talent for the next level of challenging leadership roles.
Speaker #1: Kaynes is committed to sustainability, as all of you know. As a part of our Go Green initiative and to reduce the carbon footprint, we are actively working with the Government of Karnataka on a research land, which is about 20 kilometers from our facilities in Mysore, to plant 10,000 trees across 20 hectares of land, contributing meaningfully toward the environment.
Speaker #1: We also plan to increase our consumption of renewable energy as a power source for our factory, to 3 gigawatts in solar. Installation is in progress, leading to a 23% reduction in energy intensity in the last two years.
Speaker #1: You all know that we acquired August Electronics in July of last year, and at this point in time, we have completed one year of a successful acquisition.
Speaker #1: As Mr. Vice Chairman said, this has given us a good inroad into the North American market, and our acquisition at this point in time is shaping up very nicely—a good EBITDA margin business. We are hopeful that growth will accelerate in our overseas business going forward, and also bring in more value addition to India.
Speaker #1: Not just from our subsidiaries, but also increasingly export-oriented business as well. With the team, global players like Honeywell, Otis, Eaton, and many others. Let me turn to the newer business, Oset and PCB.
Speaker #1: I'm sure that everyone is looking at this. I want to specifically congratulate our subsidiaries' head for taking the commitment across all levels. The team is working extensively to make sure that our commitments are honored.
Speaker #1: The capex done in FY26 was ₹473 crores for Oset and ₹324 crores for PCB. Our current goal is to capex at about ₹300 crores for Oset and PCB, but as I said earlier, with the subsidies coming up, we'll be funding more, and as and when we have more customers, we have the more.
Speaker #1: Cash is not a constraint here. We want to make sure that the modular investment is in place to ensure that we have checks and balances on our capex spending and revenue.
Speaker #1: We are also happy to say that we received a government subsidy for the team of ₹170 crores in the Oset business till July 26.
Speaker #1: On Oset specifically, our partnership between Mitsui and Kaynes Semicon is a major milestone for our subsidiaries. I congratulate our team for entering into such a strong partnership, and that gives Kaynes Semicon the opportunity to access the significant market opportunity in Japan.
Speaker #1: On the PCB front, we are seeing a strong traction and interest from the global players. You all know that the market, when it become volatile and when it becomes a supply chain lead time is more, PCB is one component where it is getting into the global shortage at this point of time.
Speaker #1: The suppliers are demanding that we need to pay advance, and it takes about six to eight months even for order booking. This is the time, I think, Kaynes is entering into this and our commercial production is set to start from the next quarter. Our team is doing the last-minute finishing of the capital, and we are on track as per our commitment.
Speaker #1: We're also happy to say that we have a recent engagement with one of the largest EV manufacturers globally in the automotive sector. The team has come to our plant, visited, and has given very positive feedback. The capabilities we are going to work with are on the global standard.
Speaker #1: In fact, we are now very close to closing the deal, which finally would be a significant validation of the quality and scale of what we have shared.
Speaker #1: As we said earlier, we continue to evaluate the opportunities of internal consumption versus external sales, which will be taken care of by the business mathematics.
Speaker #1: Let me also give you an update on our space technology initiative. Our first previous satellite is currently in the prototype development phase, and we expect it to be ready to launch in the middle of next year.
Speaker #1: Once the required regulatory testing is complete, we are now awaiting a confirmed launch date from ISRO on the PSLV or GSLV vehicle. This is a meaningful milestone for us—not just launching on development satellites, but getting into establishing Kaynes’ capability in the emerging satellite electronics domain, and opening the door for broader participation in India’s space technology system.
Speaker #1: Alongside this, at the request of ISRO, three of our subsidiaries—Precision and Aerosatellite Technologies—are entering into titanium gas bottle manufacturing to support their flight program. DRDO has a similar requirement for gas bottles across several of their mobile projects.
Speaker #1: This gives us a second anchor customer in this space from day one. Before I close, our balance sheet remains a priority in its own right, not just a byproduct of the growth.
Speaker #1: The discipline now across the organization will definitely bring us to the commitments that we have given. Looking ahead, the key priority is what the organization said.
Speaker #1: I just want to reiterate: NPV and value-added product—a product-led solution, rather than a service-led solution—and, of course, the next strategic frontier for Kaynes and our operational excellence.
Speaker #1: Operational excellence, quality, and disciplined capital allocation remain the foundation we are building on. I know the last couple of quarters have tested your confidence, and our commitment is to keep earning it back through consistent delivery, quarter after quarter, every time.
Speaker #1: With this, I complete my initial remarks and would like to thank you, Axis team, for hosting this earnings call, and all of you for joining today.
Speaker #1: I'll now hand it back to Christina and Succession. Thank you very much, and over to you.
Speaker #2: Thank you. We'll now begin the question and answer session. Anyone who wishes to ask a question may just start in one on the Touchstone telephone.
Speaker #2: If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while answering a question.
Speaker #2: Ladies and gentlemen, we'll wait for a moment while the question queue is being settled. Participants, you may press star and one to ask a question.
Speaker #2: First question is from the line of Renu Bade from IFL Capital. Please go ahead.
Speaker #3: Yeah, hi. Good morning, team. Couple of questions from my end. First is, while you did allude that the core EMS has done better than 40%, am I right that you mentioned somewhere in the call that EMS grew 48% during the quarter?
Speaker #3: So, can you just clarify on that first element?
Speaker #2: Yes, our metering business that we have—see, the overall business growth is 40%. The metering is 28%, so the total growth is more than 48%.
Speaker #3: Got it. And while operating performance has been pretty strong, given the increase in inventories as well as working capital, our PPT margins have been much softer.
Speaker #3: So, do we have any bridge in terms of arriving at what is the kind of PBT from the core EMS business? Just to assign and see whether the EMS business profitability below the line is intact, or if it’s a significant drain out there.
Speaker #3: And the third question, aligned to this, is: While metering, we have smart metering, and we have consciously scaled it down because of working capital issues and concerns.
Speaker #3: But it's been almost two years, and the net profitability or expectations or returns from this business have seen some optimal levels. So, any thought process does the management have to correct the strategic decision that we had taken two years back?
Speaker #3: Any views in terms of opportunities to diversify this business in the future? Some of the utilities are looking to buy out the metering businesses, so what would be your thought process on this side to release both the working capital and management bandwidth from the smart metering direct B2C portfolio that we have here?
Speaker #2: I'll answer you one by one. I'll take the profit before tax or profit after tax for our comparison at this point of time. The other income that used to come to us earlier from our QAP fund, which is where the investment has come in, is roughly about 2.5 times our PBT or PAT.
Speaker #2: That's one of the major reasons. Depreciation has gone up with the various investments that are coming up, whereas revenue needs to come. Looking ahead to the next two quarters, I think this will start coming back when we are going to generate revenue from our semicon and circuits and, of course, some of the programs that are running currently.
Speaker #2: For the second question, what you asked specifically on the metering business—as we said, we have embarked on this journey of the metering business, which has given very good visibility on our ability to develop a product and launch it to the customer.
Speaker #2: Today, though we are not able to make a better receivable from this, I want to reiterate amongst all the metering companies which are doing accumulation, we continue to be the number one inflation bank across the country, ranked then our any other competition.
Speaker #2: But that's not our objective. We wanted to make sure that we reach always the best. You are right. We are evaluating the we are now strengthening and consolidating our operational performance in metering, which is core.
Speaker #2: Of course, we understand the challenges which is alongside of installation meter and getting it in over a long period of revenue. The management is seriously looking at the options and opportunities available, like whatever the methodology we told.
Speaker #2: I don't want to commit at this point of time, but as we committed, in the February earnings call, you will hear more from us about our strategy to de-risk the receivable portions of the metering business.
Speaker #3: Sure. And lastly, what are the delivery timelines that you're looking in terms of final commissioning of the OSAT and PCB for the current financial year?
Speaker #3: Thank you.
Speaker #2: From our commitment as indicated by executive vice chairman during last year, we are going to have a commercial revenue booking from this year from third quarter and fourth quarter.
Speaker #2: And we are committed to that. And the project is on track. I want to specifically put on the record the thanks to my team in both who are working day and night to make sure that this happens.
Speaker #2: Our customers' validation is over in both the semicon project, whereas OSAT project is starting now. But we are very, very confident that we'll be doing this.
Speaker #3: Thank you.
Speaker #2: Added to what Dr. Muthukumar told, our OSAT, all the trials and validation is getting over now. We will start the commercial building. And as far as PCB is concerned, our entire capacity is being requested by one large player, a global player.
Speaker #2: So their trials are going on in our factory. As on today, as we speak. They are also approved and given us they have also approved and given us a vendor code for that.
Speaker #3: Super. Thank you and best wishes to you.
Speaker #2: Thank you very much. I request all the participants kindly limit yourself to two questions per participant and rejoin for a follow-up. Next question is from the line of Siddharth Bera from Namora.
Speaker #2: Please go ahead.
Speaker #4: Yeah, hi. Thanks for the opportunity. Sir, first question is on the quarters would you be able to share the cash flow from operations for this quarter if it is available?
Speaker #4: And second is, how much will be the smart meter revenues in the current quarter? Which we have booked apart from that, sir, I mean, in terms of new order weight, if you can share some more color we did get about 1,500 crore of new orders if you can share some color about which are the key customers there and key order rings quantum which we have got in the current year, current quarter.
Speaker #2: See, we normally don't share the revenue. Segment-wise and vertical. But because metering business and EMS business is most of you are asking specifically we wanted to share this with you so that to give a better clarity.
Speaker #2: Our overall revenue for this year, this quarter is about 946 crore on which our sales this is 946 crore is without GST. And our sales is about 90 crores so 210 crores in metering business and the rest all is in the EMS business.
Speaker #2: That is the split between the EMS, that's why we said our EMS business core growth has gone more than that. Having said that, I will go to your the next two question of who are the new logos that we are added up.
Speaker #2: I already spoke to you. We normally don't share the customers. One of the largest two-wheeler EV manufacturers we have been working with them for last one year and our photos have been finished up and serial production has started now.
Speaker #2: The global players, we already told you, last quarter we said our aerospace business is not picking up because of the global situation. But we're very happy to say that this quarter we have come back very strongly and the customers PPAP and all is going on.
Speaker #2: In fact, segment-wise, even though we don't specifically the aerospace business and all is the one which we have grown substantially up. Every segment, be it railways, be it automotive, be it aerospace defense, every segment after segment we have grown.
Speaker #2: For your exact point on the growth percentages, in a standalone EMS business, which is include other than metering business, if you take it, and of course, other than foreign entities, also because our acquisition of the August electronics was done only in July, so last year first quarter it was not there.
Speaker #2: So as a standalone EMS business, if you see our growth is 53% from 618 crores of last year to this year of 639 crores, standalone EMS business.
Speaker #2: My overseas entities, if you take from 24 crores last year to 102 crores, this has grown at 327%. There is a new acquisition that happened.
Speaker #2: As a metering business, last year first quarter our sales was 231 crores and this year it is 204 crores, which means a minus 12% growth.
Speaker #2: That takes us to 40% overall scope I have answered your question.
Speaker #4: Yes, sir. Thanks a lot for this. And would it be possible to share the cash flow from operations by the end of first quarter?
Speaker #4: And.
Speaker #2: Okay. At the end of first quarter, I think we as we said, our inventory has gone up by 177 crores. We have added it.
Speaker #2: And we have added unreceivables, we were short by 68 crores, taking it to about a total of about 259 crores as a negative cash flow.
Speaker #2: Okay. Having said that, the first quarter is very, very challenging quarter in terms of our businesses on most of the Indian entities. I just wanted to bring it to your comparison that Q1 of last year, our negative cash flow was to the level of 317 crores.
Speaker #2: The team did a remarkable challenge in doing this. Except for the inventory, I think the receivables, the negative was only 90 crores, mainly because of this metering.
Speaker #2: And in terms of EMS business, the team has did an extremely good job. Inventories is a strategic division. So we have improved on our commitments, whatever we are told.
Speaker #2: And we will ensure that going forward, our commitments of last quarter happened.
Speaker #4: Got it, sir. Thanks a lot. And in Osaka PCB put together, what has been the total investment till now? And for this year, how much investments are we planning to do?
Speaker #2: As we said at this point of time, the total capital that we have spent within these two entities just give me a minute. We did about so it's around 1,250 crores.
Speaker #2: Both put together. Yes. Right. Yes. Both put together is 1,200 crores, maybe about 700 crores in Osaka and 500 crores in our circuit PCB.
Speaker #2: PCB. And we have in transit around 250 crores of items which are yet to come.
Speaker #5: Thank you. Sender, I'll request to come back for a follow-up. I request to all the participants, kindly limit yourself to two questions per participant and rejoin for a follow-up.
Speaker #5: Next question is from line of Santosh S. Chaudhary from a vendor spark. Please go ahead.
Speaker #6: Yes. Hi. Good morning. Thanks for taking up my questions. So my first question is on the smart metering business. So sir, how do you think about this business internally?
Speaker #6: Do you see this as an extension of this EMS business or do you think that's a completely different ball game? And also in the past, you have spoken about the shift from service model to a product model.
Speaker #6: Can you shed some light on how this shift is starting or you on track to move towards the product-based model? And also as a follow-up on that, let's say one year down the line, would we continue to see the smart metering business included in the consolidated results or is there any possibility or plans to move a portion of this business or maybe a full part of this business outside the balance sheet either through diversification or any other means?
Speaker #2: I think thank you very much, sir. I think you have given us all the clues on how to do that. I will tell you, sir.
Speaker #2: The metering business, we have shared ed about two years before. And prior to that, we were a supplier to that company as a PCB assembly.
Speaker #2: So this has given us gains a very substantial confidence of getting into a product company and working on it. The metering business per se has two sets of business.
Speaker #2: One is manufacturing of meters and second is installation of the meter and doing the services for over a period of eight years to the government.
Speaker #2: Gains is always very strong in its forte of manufacturing. And when we are talking about the revenue of EX, 60% of the revenue or 65% of the revenue comes from the EMS business.
Speaker #2: So we still consider this helping as our EMS business to grow when we are at the metering business. Having said that, our forte of getting into the customer installing this meter and providing the software solutions to them is a new area that we ventured and we have been doing it's only good for a company that's taken into this initiative one year before.
Speaker #2: If you look at gains as a very distinct advantage of the company, which has got manufacturing of meter a capability to install meter and have a software integration facility.
Speaker #2: Which makes us as one of the preferred supplier or preferred manufacturer both put together, preferred service provider from the electricity board agencies because the way in which we are able to integrate and install because we have a metering manufacturing software, everything is available to one shot.
Speaker #2: These are the distinct advantage. Yes, but the business model is a little long because there is a part of CAPEX model and OPEX model, which is impacting the receivables.
Speaker #2: So our strategy to do this is how do we consolidate revenue? We are still making the revenue of 60 to 68% on this because of our EMS business.
Speaker #2: So like what you said, we have plans of various business model of divesting this other portion of the service provider separately. And making sure that the receivables from that is not impacting directly into our balance sheet.
Speaker #2: But having said that, it's not a simple thing that we need to do. We are working on this model as we commit it. We come back by our February month on our strategy to see how we are going to manage this business.
Speaker #2: But we are pretty confident that we will be able to do the turnaround by end of this year in terms of receivables and the metering business.
Speaker #6: Understood. Thank you, sir. And just one more question.
Speaker #2: And you can also understand the management commitment to this by we could have grown by we have an enough order book available in this metering business.
Speaker #2: We could have done more revenue honestly speaking. But just to make sure that the discipline of the balance sheet, we have controlled our revenue growth in this area which is also giving us it's a very, very challenging time but we want to be doing that and taking the discipline.
Speaker #6: And on the part of question where you mentioned that how is the shift from service model to supply model? How is that tracking?
Speaker #2: We have done so I'll take it. We have done all the pre-requirement study, everything. We are working with some partnership with many people. But nothing concrete has yet happened.
Speaker #2: You will hear in the coming quarters may not be in the next quarter, the next quarter, third quarter, we will have some clear idea on it.
Speaker #6: Thank you, sir. And just one more question.
Speaker #2: Thank you.
Speaker #5: Sorry to interrupt, Santosh. Kindly come back for a follow-up, please. Thank you. Participants, please limit yourself to two questions and rejoin for a follow-up.
Speaker #5: Next question is from the line of Achal Ware from Nuama. Please go ahead.
Speaker #4: Yeah. Morning, sir. Thank you for the opportunity. My first question is if you could help us with the absolute figures of the receivables trade tables and the inventories.
Speaker #4: As of June, I'm just giving a like-to-like number what it was in March 26. So if you could give a similar number, the receivable was 1,528 crore.
Speaker #4: In fourth quarter. So if you could help us with the absolute figure and did I hear it right? You said the OCF was negative 248 crores.
Speaker #4: Have I understood right? Or 1QSI 27?
Speaker #2: Yeah, you're right. Fourth quarter.
Speaker #4: Okay. And if you could help us with the absolute figures of inventory receivables and tables, sir.
Speaker #2: Okay. I think on terms of receivables, I'll start with this. We started this quarter with about 1,765 crores in total including current and non-current assets.
Speaker #2: And that has gone to 1,925 crores. Okay. Though our receivables in EMS, we started with 606 crores and we ended up with 613 crores.
Speaker #2: Which means we did almost all the collections including the GST amount. In metering business alone, it 1,311. I think that is what took us a decision to reduce the top line in the business.
Speaker #4: Got it. Secondly, with respect to the revenue growth, in the previous calls, you kind of indicated that 30, 35 percent kind of a growth.
Speaker #4: Given what we have done, given the strategy we are playing with, what is the revenue growth we should kind of pencil in for FY27?
Speaker #4: And how do you see the scale up for OSAT and PCB for FY27 in 20 years? Those are my two questions. Thank you.
Speaker #2: For revenue growth, we are committed the 2X of the market growth. The first quarter, the market has grown at 17%. And we have grown at more than 45% in our 48% in our EMS business.
Speaker #2: So we don't want to give an absolute number because there is so much of volatility in the market. The availability of material in this quarter and next quarter is going to have a huge impact into this business.
Speaker #2: So we don't want to commit on the top line number, but whatever the market growth is there, because of the strategic initiatives of keeping the inventory, keeping the manufacturing flexible, and having a very committed people, we are quite confident of achieving the price the market growth.
Speaker #2: So this is what the commitment that we can we are giving and we are working towards this. As far as OSAT and PCB is concerned, we have been told from third quarter revenue starts in both the business and we are committed a full year revenue of totally 500 crores between both 450 to 500 crores which is what we are targeting at this point in time.
Speaker #2: We are on the target.
Speaker #5: Thank you. Achal, I'll request to come back for a follow-up. Next question is from Lana Praveen Sahay from PL Capital. Please go ahead.
Speaker #4: Thank you for opportunity. My question is related to the components. As you also touched upon and given some detail in the presentation, the prices for a components has been priced on the average of a 30, 35 percent even the lead time has increased so can you give some color on overall your business?
Speaker #4: How much of this cost inflation has already been captured in the Q1? And in the coming year, how much we will see the impact of that?
Speaker #4: And is there any margin compression we are expected to see out of this?
Speaker #2: I'll touch base the base but I think I would allow Mr. Ramesh to talk about it because of his huge experience in this business.
Speaker #2: With this into two, PCB and other components. Other components that you rightly said the prices is going up by 30, 35 percent. And PCB is the one which is a challenging today because even order booking is gone with an advance payment.
Speaker #2: That's a level that industry is going on and there is a huge shortage that is coming in. Like how chip sets control the manufacturing about three, four years before.
Speaker #2: It looks like PCB is going to have a control on this. Having said that, the first quarter, if you look at foreign exchange itself purely, there's been an impact of about more when compared to the last year that this year is about 3.3 percent.
Speaker #2: Of the import level what we are doing onto the EBITDA impact. But as I said, because of the strategic initiatives that have been taken to build up the inventory, the impact was very minimal.
Speaker #2: And we also have a very good system of a back-to-back working with customers in most of the instances that is getting added up. However, the other cost escalation which is consumables price of availability of labor and the cost of labor cost of electricity, the company continues to improve on our efficiencies innovative ways of working, continuous improvements in case and where they're reducing the cost.
Speaker #2: The market is quite challenging. Looking forward, we did going to put the pressure on the bottom line in the coming quarter. Because there is a huge impact that is happening.
Speaker #2: One is availability. Second is the price. With that, I would request Mr. Ramesh sir to give more insights into this.
Speaker #3: See, this component industry has gone back to COVID times. Having said that, our company has done the deep diving and we have decided to increase our inventory so that our customers lines don't stop.
Speaker #3: In the past, we have done this and we are very confident of overcoming this. Though our pricing are all pass on, we may not get it immediately in that quarter.
Speaker #3: In the coming quarter, because it is normally adjusted quarter on quarter. So that's the update I wanted to give you all. As he said, PCB business, the PCB prices have gone up three times.
Speaker #3: When it comes to components, availability has become a big problem. Prices are also going up but those prices are going up in the range of around 10, 12 percent only.
Speaker #3: But availability has become a big problem.
Speaker #4: So ultimately, we will going to see our gross margin compression because of that because there is a QOQ I understand there is a pass through mechanism but there is a shortage of a material as well.
Speaker #4: So do you expect in the coming nine months we will see the gross margin compression because of that?
Speaker #2: So it will be difficult here.
Speaker #3: This here is a difficult year but I don't think for us whatever we have planned we will try and meet the requirement. But it is not going to be an easy year.
Speaker #3: It is going to be a tough year.
Speaker #5: Thank you. Praveen, I'll request to come back for a follow-up. Next question is from Lana Inderji 11 from CLSA India. Please go ahead.
Speaker #6: Hi. I have two questions.
Speaker #4: First, if you can give the console capex guidance for effect 27 and effect 28.
Speaker #2: Sir, we have communicated and we are standing by that. We said we will be funding for this capex for this year is about 300 crores for OSAT, 300 crores for PCB, and about 250 crores for EMS business.
Speaker #2: We are on track for that. The first quarter spend is about 90 plus 90 and 80 plus 50. 230 crores. I will put together.
Speaker #2: But we also said that we have fund is not a problem. And as and when we get the newer business, the modular capacity expansions will go on.
Speaker #2: So and also as and when the subsidy is coming, we can keep flowing with the system. This is just to keep a tight control on the cash flow.
Speaker #2: So we are on track of whatever we are committed. During the start of the year and we'll be working towards that.
Speaker #4: Sure. And my second question is again on the PCB business. While prices have increased, we have seen globally PCB margins have corrected because input costs have increased lot more CCL and other commodities.
Speaker #4: So you mentioned that you have contracted your entire quantity with an overseas customer. So what are the pricing or margin contracts over there? So what kind of ROCs or margins are you comfortable to generate from that?
Speaker #2: I leave Ramesh sir to answer.
Speaker #3: This is too early to talk about these things. However, I don't agree that margins in PCB companies have come down. Because as we catch up with the team, this last quarter, that is a second quarter of their financial year, they are all done fairly well.
Speaker #3: And this PCB crisis is going on for last three, four months. But it is too early for me to give any clear direction on this.
Speaker #3: The top lines will go up, bottom lines will get affected is what RBA and everybody is projecting. With that, I wanted to. Stop here.
Speaker #5: Thank you. Inderji, I'll request to come back please. Next question is from Lana Saloni Selgawkar from Jeffries India. Please go ahead.
Speaker #1: Sir, thank you for the opportunity. Sir, I have three questions. Firstly, you did mention about the receivable days. Similarly, can you please let us know the figures for inventory payables and the debt on the balance sheet?
Speaker #1: The second question is on the tax base. It's quite high this quarter at about 35%. Correct me if I'm wrong. So for the full year, should we expect it to normalize or stay higher than last year?
Speaker #1: And thirdly, on the OSAT and PCB, while I understand that we cannot name the customers, but just a broader idea that whenever the project commissions, you mentioned it's on the timelines are being followed up.
Speaker #1: So where do you expect the offtake to go? To domestic customers or to international customers? Thank you.
Speaker #2: In terms of the inventory, again, it's about 96 days earlier. On the first quarter end, we have gone up to about 105 days. As I told you, this is a strategic initiative.
Speaker #2: We've taken in February to import more material and keep it in our system. And we actually anticipated a little more to go but because of our revenues have been good in their regular segments, it has come down a little.
Speaker #2: For your I wanted to hear your second question again but I can answer on your can you just repeat your second question?
Speaker #1: Sir, so with the first question, I also did ask about the debt on the balance sheet. The second question was about the tax rate.
Speaker #2: If you look at the tax rate, the effective tax rate for the company is around 32% and odd. And our total debtors, I think Senthil, can you just tell it's about Senthil, you are there?
Speaker #5: Senthil, sir.
Speaker #2: Okay, sir. Sumit is Senthil with him?
Speaker #4: Yes, yes, sir. I am here.
Speaker #2: Yeah, tell me, Senthil.
Speaker #4: On that, sir.
Speaker #3: He's about time, sir.
Speaker #2: Yeah.
Speaker #4: Okay. See, effective tax rate is around 23%. And at the consolidated level, it is at 35%. And the walk for this is like amortization, whatever we are doing for the intangibles, so that is around 3%.
Speaker #4: And the others, whatever like semicon and circuits, whatever the intercompany interest, whatever we are charging off, that is getting capitalized, that is around 5%.
Speaker #4: And the other loss-making entities, our contributing to around 4%. So this is majorly the impact of the contributors to the impact of the higher effective tax rate.
Speaker #1: The debt on the balance sheet, please.
Speaker #2: Not a good. Back to you.
Speaker #1: Sorry. I couldn't hear you.
Speaker #2: Any other questions that you have, Sunali?
Speaker #1: No, I think so on the debt part, we don't have the number right now, is it?
Speaker #2: We have the number there. It's the EQB ratio is good at about 0.3% at this point in time. The exact number, I'm not able to tell, around 800 gross total.
Speaker #2: But I can I think the team is picking it up. We are very well in control. Even for the approved loan for our long-term capital in semicon and circuits, we are not taken at this point of time.
Speaker #2: We're going through the internal funding you all know.
Speaker #5: Thank you. Sunali, I'll request to come back for a follow-up. Next question is from line of Aditya Bhartiya. a. From Investec India, please go ahead.
Speaker #4: Sorry, sir, I didn't hear it properly. Was the debt rate number that you spoke about around 800 odd gross? There was some disturbance I couldn't hear.
Speaker #2: Yes, approximately, but I think I'm just looking at from my the finance team there. It's around that number. We can give you the exact numbers soon.
Speaker #2: You can go to the next question.
Speaker #4: Okay. Because on the cash flow from operation side, we are speaking about roughly 260 crore rupees of negative CFO.
Speaker #2: Yes.
Speaker #4: I guess there would have been around 100 odd 100, 150 odd crore rupees of KPEX. This particular quarter, including the new businesses. Is that understandable?
Speaker #2: 160 gross is the capex for this quarter. 180 gross, sorry.
Speaker #4: 180 gross. Still, sir, the net debt number appears to have increased much higher than what it should be. So just kind of wondering how the reconciliation can happen.
Speaker #2: Sir, we have given when I said operating cash flow is 275 gross.
Speaker #4: Sorry, sir?
Speaker #2: I said only operating cash flow consolidated cash flow at debt. My cash profit is about 158 gross. My inventory gone up by 156 gross.
Speaker #2: My receivables have gone up by 90 gross. And others about 144 gross. Tax at 26 gross. My fixed debt is 360 gross. The investment is 311 gross, 317.
Speaker #2: And of course, financing is 263. Those are the numbers for the consolidated cash flow page. What I said 259 is at the net cash used in the operating activities.
Speaker #4: Understood. Understood, sir. And on the issues that we are kind of highlighting around availability and cost side, does that mean that we should be anticipating lower margins at least in the next few quarters?
Speaker #4: And how does the past two exactly happen? Because my understanding was that at least in the PCBA business, it is more almost like an immediate pass-through.
Speaker #4: And none of the other PCBA companies also spoke about this challenge. And that's why I'm kind of wondering how should we think about this mechanism.
Speaker #2: Sir, like what the chairman said, I wanted to reiterate the point. It's a challenging time. We need to make sure that we have the balance between setting this off and also grow and service the customers.
Speaker #2: If we are not going to service the customers and if they are going to fail, it's going to impact us also. So we are working very, very closely with the customer.
Speaker #2: We have a strategic top customer wherein we have an understanding with them on an agreement like this on how we can move forward. Because delayed decision-making, we'll have an impact on the business.
Speaker #2: Continuity and also we don't want the customer line to stop. So we have got an agreement with various customers on where all we can go, to what level we can go, and the decision can be taken at our level.
Speaker #2: And also where the customers also have been talking to us frequently. And ensuring that the decisions are given fast. So our aspirations and our working is towards not to have any impact on the bottom line.
Speaker #2: But having said that, there'll be some timing delay between this, which will have an impact. But one thing that we can assure you is, yes, we will be definitely faster than our peers in the industry.
Speaker #2: And we'll ensure that the minimum impact is to us.
Speaker #5: One another point one another point, it is a global problem the entire industry is aware of it. This has been going on for the last three, four months.
Speaker #5: So I'm also surprised if nobody has addressed this. Thank you very much, Aditya I'll request to come back. Next question is from line of Praveen Sai from PL Capital.
Speaker #5: Please go ahead.
Speaker #4: Yeah. Thank you for a follow-up. One question is related to your order book. Can you give indicative numbers how has been the sector-wise or the segment-wise your order book right now?
Speaker #2: Sir, normally we don't give sector-wise or segment-wise. But we have a very good order book. And in the first quarter, our team has added more into the order book than what we have opened up or what we have delivered.
Speaker #2: So a very strong order book of more than about 8,900 grosses in the system. And things are shaping up much faster. In spite of the global situation on the commodity availability, on the other side, with the price escalation going on, the customer offtake at this point in time is pretty good.
Speaker #2: If you see the growth, what is happening both in the domestic and also global. In spite of the inflation that is happening across the world, be it North America or in India, or in Europe, if you see the demand has not softened at this point in time.
Speaker #2: And it's still growing strong. So this gives us a thing that things are going to settle soon. And then it is going to be in a positive trajectory at this point of time.
Speaker #2: We don't see anybody saying that they're going to cut down, including the public sector enterprises or the government.
Speaker #4: Okay. Thank you, sir. Thank you.
Speaker #5: Thank you very much. Ladies and gentlemen, in the interest of time, that will be the last question. I'll now hand the conference over to the management for closing comments.
Speaker #2: And sir, in the addresses, thank you very much for your time and confidence to us. We try to answer most of the questions what you have asked for to a satisfaction.
Speaker #2: But reach out to us in case you need any concerns. For a few of the questions, the specific questions is asked, our investor relations team members permit, we'll reach out to you with a detail.
Speaker #2: And we really appreciate your support and continued commitment onto the chain. And your support is what's making us to grow faster and at the same time sustainable growth.
Speaker #2: Thanks to you. Thanks to my leadership team. Thanks to my operating team who have been paying strong during this difficult time. And making our company some good to great.
Speaker #2: Over to Mr. Ramesh, sir, for final closure.
Speaker #4: Thank you to one and all. Having interest in our company. We are continued with our commitment. And the days to come are challenging. But you will see good results.
Speaker #4: Thank you.
Speaker #5: Thank you very much. On behalf of Access Capital Limited, that concludes this conference. Thank you for joining us. And you may now disconnect tonight.
Speaker #5: Thank you.
Speaker #2: Thank you.
