Kaynes posts 11% sequential revenue drop on delayed railway order, cuts FY26 target
NEW DELHI: Electronics maker Kaynes Technology on Friday reported an 11% sequential decline in revenue in the December quarter (3Q26) at a time when its closest rival Syrma SGS was growing at a steady pace.
In a post-earnings call, Kaynes’ senior management attributed the quarterly revenue decline to a one-off hit from the delayed implementation of Kavach, a suite of sensors and electronic safety equipment for Indian Railways.
“The majority of the decrease was due to the delay in the implementation of our Kavach order on our vertical railways. ₹300 crore. Our orders cannot be canceled, but there are often delays due to lengthy authorizations from various institutions. “The rest of our business remains solid,” said Ramesh Kannan, founder and vice chairman of Bengaluru-based Kaynes.
The December quarter’s income remained in February: ₹804 crore, down 11% sequentially. Net profit down 37% compared to September quarter ₹77 crore. The decrease in profits was due to a sharp increase in stocks of unsold finished goods; This increase almost doubled on an annual basis. ₹43 crore and increased by 7% ₹40 crore in the September quarter.
Following the results, Kaynes cut his FY26 revenue forecast to: ₹4,100 crore as compared to previous ₹4,400 crore. The management attributed the entire downgrade to the delay in distribution of Kavach products for Indian Railways.
Kaynes shares had a volatile session on Friday; It opened 5.4% lower than Thursday’s close and then reversed course, closing the day 2.3% higher. The stock is up 6.2% for the week.
Despite the pressure on revenue and profit, full-time director and chief financial officer Jairam Sampath said the company was confident of “generating positive operating cash flow at a consolidated level by the end of this financial year”.
“We worked really hard on OCF. You might think I just come here every quarter and talk about OCF, but we did a lot of hard work and we could have been cash flow positive during the December quarter. But we chose not to do that and our net cash flow for the quarter was negative.” ₹55 crore,” Sampath said.
Operating cash flow and margins have become a major focus in the electronics manufacturing services (EMS) industry, which has historically scaled through low-margin assembly operations and government production-related incentives.
Syrma SGS, which announced its earnings on January 29, turned cash flow positive in the December quarter. Syrma also reported a 10% sequential increase in quarterly operating income. ₹1,264 crore, outpacing Kaynes’ performance in the December quarter.
Later, Jasbir Singh Gujral, managing director of Syrma SGS, said: Mint The company may also venture into semiconductor projects, an area Kaynes is confident about for the next two fiscal years, he said.
“Given our existing contracts with customers and ongoing active efforts to improve OCF, we still expect to be on track to achieve $1 billion in annual operating revenue by FY28. While this means our annual revenue will likely need to double during this period, we expect our new bets in Osat (outsourced semiconductor assembly and testing) and PCBs (printed circuit boards) to contribute. ₹1,500 crore and ₹In the analyst call, Sampath stated that we will grow our business by achieving Rs 1,000 crore annually in the next two years.
Credit rating agency Icra LTd maintained Kaynes’ net borrowing limit A-negative credit rating a week before earnings. ₹780 crore to finance new projects.
“At the same time, our design-led manufacturing, which currently contributes at least 20% of our revenue, is likely to grow by 5-7 percentage points in the next two fiscals,” Sampath added.
Analysts said the company’s resilience will be scrutinized, particularly based on its ability to achieve promised targets.
“Most of Kaynes’ projects are supported by government incentives, including the ECMS program, which approved Kaynes’ PCB project, and ISM 1.0, which approved Kaynes’ Osat. All this means that the company has solid support and will continue to grow in the long term, looking at its overall order book. But much will depend on whether Kaynes can turn cash flow positive in the ongoing quarter and see the growth it promises in the next,” said vice president of brokerage firm Elara Capital. Harshit Kapadia said “two quarters”.
