Ladies and gentlemen, good day and welcome to the Kaynes Technology India Limited Q1 FY 2026 Earnings Conference Call hosted by Axis Capital Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference has been recorded. I now hand the conference over to Mr. Nikhil Kandoi. Thank you, and over to you, sir.
Thank you, Anushka. Good morning, everyone. On behalf of Axis Capital, I would like to welcome you all to the Q1 FY 2026 earnings phone call of Kaynes Technology India Limited. We have with us the management today. We are represented by Ms. Savitha Ramesh, Chairperson of the Board. Mr. Ramesh Kunhikannan, Managing Director. Mr. Jairam Sampath , Full-time Director and Chief Financial Officer. Mr. Rajesh Sharma, Chief Executive Officer. Now, I'll hand over the floor to the management for their opening remarks, post which we'll open the floor for Q&A. Thank you, and over to you, sir.
I am Ramesh Kunhikannan, Managing Director, Kaynes Technology India Limited. Good morning, everyone. On behalf of Kaynes Technology team, I would like to welcome everyone to the earnings call for quarter one FY 2026. I have, along with me, Mrs. Savitha Ramesh, Chairperson of our board, Mr. Jairam Sampath, Full-time Director and CFO, Mr. Rajesh Sharma, CEO, Mr. Sumit Verma, Investor Relationship, and MUFG IR, our Investor Relationship Partner. Let me now walk you through our performance for Q1 of FY 2026. Our total revenue stood at INR 6,735 million, reflecting a year-on-year growth of 34%. Operational EBITDA for the quarter was INR 1,130 million, marking a strong growth of 69% compared to the same period last year. This translates into EBITDA margin expansion of 350 basis points over quarter one FY 2025.
Similarly, our profit after tax came in at INR 746 million, representing a PAT margin of 11.1%, which is an improvement of 100 basis points year-on-year. Our order book continues to show steady and healthy growth, increasing from INR 50,386 million in Q1 FY 2025 to INR 74,011 million in Q1 FY 2026, reaffirming the strength and visibility of our business pipeline. Our projected acceleration in revenue growth reinforces our trajectory as a resilient long-term value creator and a consistently high-performing company in the industry. With a solid foundation and clear strategic direction, we are confident in our ability to sustain this performance and deliver predictable long-term growth, positioning Kaynes as a company that all our stakeholders can rely on well into the future. This year, our performance has not only been strong in absolute terms but is also setting industry benchmarks for the growth of EMS companies in India.
Despite facing macroeconomic headwinds and global uncertainties, Kaynes has stood resilient, consistently delivering on our strategic priorities. This underlines the strength of our diversified business model, deep customer relationships, and relentless focus on execution. We continue to sustain profitable growth while driving efficiencies across operations. Our growth momentum spans across all business verticals, with particularly strong traction from new clients in the electric vehicle industries and aerospace sector, industrial sector, and rail sector. This underscores our vision to build a future-ready, robust, and profitable business portfolio. We are also witnessing a strategic shift from being a pure EMS company to becoming an integrated ESDM company. This evolution positions us to serve high-volume customers across sectors, which enables enhanced ownership of product lifecycle and deeper strategic engagements.
Our international expansion strategy is yielding results, w ith the acquisition of August Electronics in Canada, we have slightly scaled our EMS capabilities in North America, gaining a manufacturing footprint and access to large, high-margin customers. This strengthens the Canada-India value proposition as a reliable and strategic alternate to China-based sourcing, offering global clients both proximity and flexibility.
On the infrastructure front, we are pleased to share that our OSAT facility in Sanand is almost there, with proto products for AOS, and is on track to be fully operational for commercial production by December 2025. Similarly, the multi-layer HDI PCB plant in Chennai has also reached the final stages, with building construction complete and operational readiness expected by January 2026. These projects are critical in advancing our vertical integration and enabling end-to-end solutions within India. The Kavach Development Program is progressing well and is currently nearing pilot implementation.
We are hopeful of receiving the necessary clearances shortly and beginning commercial operations soon thereafter. We continue to explore new geographies and capabilities through a well-balanced approach of organic expansion and strategic acquisitions. Expanding into new regions is critical for any company's global growth. It allows us to tap into diverse customer bases, reduce market concentration, risk, assess local talents, and supply chains, strengthen our ability to serve global clients more efficiently. This multi-market presence also enhances resilience and positions us to capitalize on emerging opportunities across different economies. Before I conclude, I want to thank all our investors for their continued trust in our vision. We remain committed to delivering on your expectations, driving innovation, and building a resilient, future-ready enterprise. With that, now I hand over the call to Mr. Jairam Sampath to walk you through our financial performance. Jairam, over to you. Thank you.
Thank you, Ramesh ji. Good morning to all the participants here. My name is Jairam Sampath. I'm a full-time Director and CFO at Kaynes Technology. Thank you all for joining today's call as we start a new quarter. I'm extremely happy to share Kaynes Technology's financial results for the first quarter of FY 2026, and we'll present some of the highlights, and then, of course, there is a ppt available, which has been uploaded, and you could refer to them for more information.
For the first quarter of FY 2026, our consolidated total revenues were at INR 6,735 million, representing a 34% year-on-year growth. The consolidated EBITDA for Q1 FY 2026 was at INR 1,130 million, showing a 69% year-on-year increase. EBITDA margin for Q1 FY 2026 stood at 16.8%. The consolidated PAT for the quarter was INR 746 million, up 47% year-on-year, and PAT margin for the quarter stood at 11.1%.
Consequently, our ROE and ROCE for Q1 FY 2026 were at 15.4% and 13.7%, respectively. Our order book has grown substantially on a year-on-year basis. Last year, same quarter end, it was INR 50,386 million, and Q1 FY 2026 end, the order book stood at INR 74,011 million. Net working capital days for Q1 FY 2026 stood at about 132 days, with inventory going up from 113 to 115. The increase in receivables contributed to an increase in net working capital, which was based on the profile of sales during the quarter. We remain focused on further optimizing our working capital with a clear long-term plan to collaborate closely with our suppliers and bring down inventory levels. As part of this effort, we are also implementing strategic initiatives such as supplier-managed inventory, collaborative forecasting, demand planning, enhanced production planning, and scheduling.
And also, we're working with our customers to make sure that we are able to collect monies on time. These measures are expected to bring meaningful improvements to our capital efficiency by the end of FY 2026. As far as the new plant projects are concerned, OSAT plant in Sanand, Gujarat, and the PCB plant at the HDI multi-layer PCB plant in Chennai are in full swing of construction. And as Ramesh ji explained to you, we'll see some significant progress in terms of their ability to start operational and get customer approvals during this fiscal. And we will start doing some billing for the OSAT business this year. And the PCB business will start commencement of operations from early next year. A recent acquisition of August Electronics Canada marks a significant step in our journey of inorganic growth.
This acquisition not only strengthens our presence in North America but also enables us to build synergies in capabilities and customer segments where Kaynes had limited presence earlier. It opens doors to high-margin customers and enhances our ability to serve global clients, especially the North American clients, more comprehensively. For a fast-growing company like Kaynes, inorganic expansion is a strategic necessity. And it allows us to accelerate our entry into new markets, diversify our portfolio, and access critical technologies and talent. All of this increases the scope of our sales and also improves the profitability. We remain committed to identifying and executing such value-accretive opportunities as we continue to evolve as a global player in the electronic sector. The Indian EMS industry is entering a new phase, transitioning from being a pure play manufacturing service provider to an integrated ESDM company.
This evolution is vital for India to enhance its position in the global electronics value chain, enabling the country to move beyond cost competitiveness to become a hub of engineering and product innovation. Kaynes is proud to be at the forefront of this transformation, and we are leading this transformation in many areas. We are not just participating in the industry shift, we're helping to lead it by building deep capabilities in embedded systems design, prototyping, high-end electronics system integration, and we are evolving, as I have indicated earlier, from an EMS provider to a strategic thought partner to our customers.
This allows us to co-create the next generation of products and offer end-to-end solutions from concept to production. With this, I complete my initial remarks, and I would like to place on record my heartfelt thanks to Axis Capital for hosting this earnings call. I would like to thank all the participants for committing their valuable time for attending this call. Over to you, Nikhil.
Anushka, please open for Q&A.
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We take the first question from the line of Nitin Arora from Axis Mutual Fund. Please proceed.
Hi, sir. Good morning, and thanks for taking my question. The first question is on the revenue side. We started on a 34% growth, and I just wanted to gauge your confidence on meeting your guidance, which is about INR 4,500 crore. How, because it's like achieving about 65% growth for the next nine months to nine months last year, how's the progress panning out? How confident are you that eventually these orders will get executed? And when you give your guidance of INR 4,500 crore, it is purely organic or inorganic? What you have done is also a part of it. So that's my first question, and then I'll come on the second question.
Thank you, Nitin ji, for your question and also time for attending this call. So firstly, this INR 4,550 crore was the kind of number that we had projected. It has three components in it. INR 4,250 crore was the component which is our traditional, quote-unquote, "traditional EMS business," ESDM business. And then about INR 100 crore we projected for our OSAT business because we probably start operations and the commencement of operations by the last quarter. And about INR 175 crore were supposed to come in from our business acquisition in Canada. So from the perspective of the EMS business, we hopefully will catch up by the end of second quarter. We probably exceed another INR 1,000 crore of EMS business in the second quarter. And then, of course, I'm happy to tell you that we'll also integrate the business from August Electronics from our second quarter itself.
By all accounts, the business of OSAT seems to be on schedule. We maintain our what I call the guidance of INR 4,500 crore plus on a consolidated basis. We've also seen an upward movement in the EBITDA number. As you know, from first quarter itself, we probably are having a product profile which is leading us to a higher EBITDA. We could expect a similar thing going forward for the entire year.
So what are you trying to say? The margins, what you have reported about 17%, 16.8% or 17%. You think this mix will continue because your guidance to margin is 15+, 50 basis points? So this mix and efficiency will continue. That's what you're trying to say over the next nine months?
Yes. Yeah. So for the remaining nine months, you can expect an EBITDA similar to the first quarter, if not more. And we'll update that sometime during the first half or maybe the third quarter when the actuals will be on the board.
Yeah. Okay. So just last part on the cash flow. I understand company is growing very fast and also improving the profitability. But I think all investors asked you even at the time of QIP was, "When do we see the cash flows emerging in the P&L and the cash flows coming?" So can you throw some light from which quarter or, rather, which direction one should look that the company will start generating cash flow part as well, which is a big ask, right, from all the investors to you? That's my last question. Thank you.
Yes, Nitin ji. So fundamentally, like I explained earlier too, so there were some receivables which we had acquired, which were receivables but not due. And we are trying to convert them into collections. And I had taken time until the first half. So hopefully, we will do that during the first half. So you can expect in FY 2026 a positive OCF and a significantly positive OCF, not just barely crossing the threshold. And the current small spike in the working capital days is in preparation for the second quarter. Like I said, second quarter is about INR 1,000 crore, significantly higher than our first quarter number. And as we go forward, the third quarter will also increase and so on. So this is a natural ramp-up process.
So in between the quarters, in our, especially our industry, because of cyclicity, the first quarter is small, second quarter is a little larger, third quarter is even larger, and the fourth is the largest. So by the time we reach the end of the year, I think we would probably perform on the expectations in terms of both OCF and as well as the working capital days, let's say, coming sub 70. So that has been our objective. So that on a steady basis, if we can keep it there, then we would have excellent ROC and ROE too. So we are on track from whatever we see operationally. And we have taken some steps, etc.
Yeah, there's been a delay of a couple of months in implementing certain strategies, but then we need to balance out our effort on business development and also on operational improvement. So, you can expect some good improvement, maybe in the first half, one tranche of improvement. And by the end of the year, you will see significant improvement.
Thank you very much, sir, and team. All the best.
Thank you, Nitin ji.
Thank you. The next question is from the line of Ankur from HDFC Life. Please proceed.
Yeah, yeah. Hi, this is Ankur. So good morning, and thanks for your time. Just following up on Nitin's question on the cash flow. So what I understand on the inventory side, the build-up is for Q2. Could you also help us understand what's happening on the debtors because there's a big jump, both YoY and on a Q1, Q2 basis on the debtor side in terms of number of days? And I think you mentioned something about a change in mix driving that, if I heard it right. So if you could please help us there.
Yeah. Fundamentally, what happens is with the debtors, as you know. April typically is a very muted quarter. First quarter, always you'll see a bit of a spike, especially on a growth trajectory, a bit of a spike in the working capital because a lot of billing. April is smaller month than May. May is smaller than June. June is fantastic. But then you'll see July is bigger than June. All through the year, from April to the next March, every month, one month, there's an increase. Obviously, quarter-end results will reflect that debtors' position. And I had explained earlier, as I had explained earlier, there was this other current asset, which is basically essentially receivables that we had received as part of the acquisition.
I had taken time till the first quarter to get some resolution on that so that the abnormal spike that is shown on debtors because of this particular reason is about INR 350 crore. Once that goes out of the reckoning, then I think we are quite good. In fact, we have made a lot of improvements in efficiencies too. Like I was explaining to Nitin ji, you can see an improvement in first half, one tranche. By the end of the year, significant OCF positive will be there. The good news is that we also, probably by the end of the year, we will improve the asset utilization too. From the point of view of having to put in more money to support next year's business, etc., I think you will see less propensity towards that. The company will start improving efficiency, also generate resources for any further investments.
In this area, we have been working closely. My name is Ramesh Kunhikannan. In this area, we are very closely working on the inventory side also. So a combination of inventory and receivables should help us to achieve what we want to do. Whatever engineering and homework we have done on the engineering side has started producing results.
And also, just to add to Ramesh ji, the effort has been earlier to make sure that we get the cost profile right because that's a long-term thing. And the other working capital-related improvements can be done on an ongoing basis. That's what we have focused on. So you've seen the result of one effort, which is the cost reductions. You'll see the effect of other efforts by, like I said, first half end and then more fully during the year. Thanks, Ankur.
Okay. So that's our second question on the P&L. One was on the top line. Very clearly, at 34%, growth is much lower than what typically we've guided to, especially on the automobile segment, where I think the growth is now down to more like 24%-25% for the quarter. So one, if you could help us understand why the slower than guided growth, were there any customer-specific issues? Just trying to understand when you are saying fully it will pick up, any reason for Q1 being soft? And also, what is driving this big jump in margins on a YoY basis? Yeah. That's all. Thanks.
Yes, Ankur. So our assessment is, of course, I mean, I'm sure you get numbers from other P&L companies and other automotive sector companies, and you know the reality of the automotive sector too. But ours is a diversified portfolio. So one particular sector does not dim our total. Let's say it takes about a quarter to kind of readjust our execution direction. And so that's why we are pretty confident with the order book coming in, etc. And also, automotive also, we see now some good traction. I think some destocking has happened in the pipeline, perhaps. I'm just guessing here. And I think we will surely be back on track with a good, let's say, better growth than what you have seen in first quarter. The good news there is that the margin expansion has been across all sectors.
It has not just been driven by one or the other. They're not just industrial. Across all sectors, evenly, we have seen at least 200 basis points improvement in gross margin level. And that is what has helped us to kind of post these numbers. And that's why we are pretty confident, based on the order book profile that we have with us, we're pretty confident that this margin expansion is here to stay for at least medium term till some significant changes happen in our portfolio. As you know, in the second, third, and fourth quarter, we start executing some more of aerospace and some railway products and so on. And so that will also probably be a more healthier growth of our profitability, etc. If this answers the question, we can move to the next question.
Yes, sir. Actually, the participant is out of the queue. We'll proceed with the next participant. The next participant is Sonali Salgaonkar from Jefferies India. Please proceed.
Thank you for the opportunity and congratulations on a great margin again this quarter. My first question would be an update on OSAT in terms of how much CapEx has been utilized. When are we sort of targeting commencement of the operations? At what utilizations? Probably anything you would like to share in case of customers? And also, what kind of sales you expect in FY 2027-2028?
Thank you, Sonali, for your time and nice question so we already have explained to you that we have two major clients. One is an American client. I think most of you know who they are. It's AOS. And the other is our own Indian client who has acquired a Japanese business and we have a third client which has been lined up now. And it's a German client and so from the perspective of business, I think we now have a good, let's say, mix of businesses from three different countries and so this is pretty much better than what we had expected. The construction is well on its way and by the first week of August, at least the first building will be ready along with the design office and so on.
By, let's say, September or so, we'll have operational, let's say, Phase 0.09, if you will. We'll start shipping commercial as we have promised in the fourth quarter, but maybe it will happen sooner than that. As far as OSAT is concerned, now we have three good major clients. These are clients which any company would be proud to have in their portfolio. Of course, we do have MOUs signed with another four clients. By the end of FY 2027 or so, when the bulk of the, let's say, almost 50% + of total CapEx of 3,400 will be consumed by FY 2027, we would probably have those clients also on board. Some of those clients with whom we are working also very well-rated, especially Silicon Photonics and so on and so forth.
They are unlisted companies, but they have got a very good, let's say, investments into those companies. They have a large number of clients. So on the advanced packaging side also, we are having excellent traction. And so it's going the way we anticipated, and probably a little better because now we have three good clients, at least in the first phase, which is half of the CapEx gets implemented by the end of FY 2027. We would have excellent capacity utilization. And since these clients are all global clients and they are all leaders in their area, we also expect the yields to be good because the clients are committed to help us to set the process for their respective products. So it's a kind of a technology transfer and business transfer activity.
Understood. Just confirming one thing. Right now, as a company in our core EMS business, we are hardly exporting anything, probably 10% of our overall sales. But are we aiming to majorly export the OSAT output, or will it be used equally for domestic import substitution and for exports as well?
Yeah. So finally, it will get targeted as an import substitution. But being a semiconductor, it goes into semiconductor supply chain, which is outside of India typically. And as you know, this is also semiconductors are generally outside the purview of most of these tariffs, etc., because of cross-dependence. There are 72 countries which have to work together to make a semiconductor work. So whether it's U.S., whether it's China, everybody is careful about not putting semiconductors under the purview of these things. So from that perspective, we think that it will increase technically the exports, but all the consumption will be bulk of it will be driven by India because India is going to become a large consumer, electric vehicles, industrial production, and so on. So going forward, I think you can see a huge amount of indigenously produced chips being consumed in India.
Okay. So initially, you're going to export it, but ultimately, that product will again be probably after some add-ons imported in India. Is that a fair understanding?
Yeah. Either with add-ons or even it may be supplied just as a chip to Indian manufacturers.
Got it, sir. Very clear. Sir, my second question is, again, on your guidance, just wanted to confirm what you said to the earlier participant's query. You are, as of now, retaining your FY 2026 guidance, right, on the sales and margins because you are expecting to catch up in the coming quarters? Okay. Sir, in terms of the working capital days, are we targeting to reduce them at about 100 odd days by the end of the year, or do you think it will be slightly elevated given the first quarter was about at 132 days?
No, no. It will be lower than that. Actually, effectively speaking, it's already lower than that. It's just that there was one extra item which was due to our acquisition of one company, a wholly owned subsidiary. So that amounted to about INR 350 crore, and we are finding some solutions, financial solutions for it, financing solutions for it, which we think that we can probably complete it by the first half. Once we do that, if that portion of the receivables with INR 350 crore removed, then we are already somewhere around 70 days on average working capital.
So we think that, and also, Ramesh ji explained that we are working with suppliers also so that we can ask them to keep the inventory locally, and then so that the burden on us to fund the inventory, at least bulk of the inventory till it gets balanced out, etc., will be lower. So you can expect even better than 100 days, etc. Obviously, by the end of the year, if this extraordinary item of INR 350 crore is dealt with, we probably will be around 70 days and lower.
Got it. So very clear. And just one last question from my side on the order book. So order book has been.
Sorry to interrupt, Ms. Sonali. I would request you to go back to the.
Yeah, we can go ahead. It's a short question. You can go ahead, Sonali ji, about the order book.
Yes. Sir, order book. Thank you, sir, for accommodating this. On the order book, year-on-year growth has been definitely very strong, but QoQ, we have seen about just 12% order book growth. Is that because of the high base catching up, or do you think that sequentially as well, order book will start accelerating from the coming quarters? That's it from my side.
Yeah, yeah. No, no. Actually, even earlier, if you see the monthly order inflow, sometimes it comes down, sometimes it goes up. It is more like timing of the order placement rather than any trend. But if you see broadly, if you take a moving average of three months or something, you will always see a significant increase. So opening at 7,400 is not a bad thing because now bulk of the orders in the other sectors are also coming in. So our assessment is that this is a strong order book. It's still growing.
Sure, sir. Perfect. Thank you so much and all the best to the team.
Thank you, Sonali ji.
Thank you. Before we proceed with the next question, ladies and gentlemen, in order to ensure that the management is able to address questions from all participants, please limit your questions to one per participant. The next question is from the line of Manish Ostwal from Nirmal Bang Securities Private Limited. Please proceed.
Thank you for the opportunity and good set of numbers given the macroeconomic condition globally and locally. My question on the recently raised capital. So can you talk about the area of future investment in terms of category, organic or inorganic, where we see the investments the company will be making?
Yeah. So of course, the objects state all the possibilities in terms of investments that we can do, including debt reduction. There are some things like inorganic, etc. So we have taken an omnibus kind of, let's say, definition for our investments. But broadly, we would like to go more and more into the area of inorganic acquisitions. They are on three fronts. One is in the geography front, and then second is, of course, we want to strengthen our design portfolio. We have done some small, small investments. We have talked about it earlier also.
We always do a small investment first as a test, and then we probably add more to it. It's more like a nibble, a small morsel, and then a big meal. So that we have done in geography expansion. So you can see some significant acquisition in perhaps North America geography going forward. Europe is a fountainhead of talent for design. So we are going to strengthen our design play, especially ODM play in places like railway, industrial, etc. So the next level of investments will go into that.
And then, of course, the third one is to deepen the technology footprint by suitably adding backward integration into some of the niche areas so that we can reduce cost in our total consolidated portfolio. So all of these efforts, whatever money that we have raised, is to add fresh initiatives so that we can increase the scope of our sales. By adding geographies, we can increase the value addition by adding ODM, and then we can reduce cost by doing backward integration.
Yes, sir. The second question on the. I'm just confused with your comment on the working capital side. Earlier, you shared the sub-70 is the number we will achieve by F 2026 versus 87 reported in F 2025, and the current quarter is 132. And then you said sub-100, it is better than the 100 days. So can you just clarify what is the actual aim to achieve the working capital side for F 2026 by the management?
Sir, our target is 70 days without any extraordinary items. So the extraordinary items, as you have studied last year's balance sheet also, so there's INR 350 crore which we have gotten from acquisition, a receivable which is receivable but not due. So we are trying to find financing solutions for it, and most probably in the first half, we will find it out.
So once the INR 350 crore goes away, because it's a definite item which has nothing to do with our regular operations, so once that goes away, we are already consistently at about less than 70 days of net working capital. And in order to keep it there, we will also work with some of the supplier partners so that some of the inventory burdens, especially the balancing inventory burdens, can be transferred. So our target is 70 days without this extraordinary item. Hopefully, we'll find a solution for it before the second half starts.
Okay, sir. Thank you for taking my questions and all the best for delivering the cash flow outcome for this particular year. Thank you.
Thank you, Manish ji.
Thank you. The next question is from the line of Vipraw Srivastava from PhillipCapital. Please proceed.
Yeah. Hi, sir. I'm audible. Hello. I'm audible.
Yeah, Vipraw, you are audible.
Right. So quickly, sir, first of all, on the margin side, so if I heard correctly, you were saying that you would be maintaining this level of gross margin in coming quarters. So is the understanding correct that you end up higher than your guidance, which you carried for in Q4? You are upgrading your margin guidance. Is the understanding correct?
Yeah. So okay, let me put it this way. We are guided for about INR 4,500 crore on a consolidated basis, including all our subsidiaries and so on. And we had said that 15.6% or so was the EBITDA expected. We are saying that looking at the first quarter, the EBITDA might exceed the guidance of 15.6%. Now, how much exactly it will exceed, you can probably make a better estimate by the first half-yearly results. As far as these numbers are concerned, we maintain the guidance that we have given, and you will see a significant acceleration in the second quarter.
Got it, sir. And so secondly, if you can give some color on what's the reason for this margin expansion, why has it happened after Q4, what has changed, any color on that, that will be very helpful. Thank you.
Yeah, yeah. So the margin expansion is a direct consequence of two factors. One factor is the gross margin, which has something to do with the material cost reduction vis-à-vis the pricing. And the second one is what is called operating leverage. So you will see both of these in action. Like I said, there are, of course, more business in portfolios where there are better margins. That is a significant contribution to increase in EBITDA number. But in addition to that, we have seen an increase in gross margins across the board. That means all the six verticals, the orders have anywhere between 50-200 basis points increase in the gross margin level. And going forward from first quarter to second quarter, obviously, the sales will keep going up. So we can see an effect of better operating leverage too.
So that's why we are confident that whatever estimate that we had made on the margin, because of these two factors, one is gross margin across different sectors going up, certain sectors doing well where margin is good, plus operating leverage, we think that we can have a significant increase in our EBITDA number by the end of the year too, compared to the guidance.
Sure, sir. Thank you. That's all from my end. Thank you.
Thanks, Vipraw.
Thank you. The next question is from the line of Nikhil Kale from Invesco. Please proceed.
Yeah. Thank you for taking my question. Just one clarification I wanted, sir. Can you just help me with the absolute receivable number that you have as of end of Q1, including the one-time thing that you talked about, the acquisition-related receivable that you have?
Can you repeat the question?
Just wanted your absolute receivable number in INR million as of end of Q1, which is the figure you have given, but if you can help me with the absolute number.
Yeah, just one second. Hold on. Yeah. So the other non-current items, which is INR 390 odd crore, plus 858 is our regular receivables, which is based on our regular business. And it's at higher because the profile of sales keeps going up. So April sales is lower than May, May is lower than June, June is lower than July, like that. So March is normally the highest.
So as we go up, there will be some impact. But hopefully, the non-current portion, other non-current assets portion, will deal with it by end of first half so that the INR 300 and whatever crore is there, that will get addressed. In which case, then the numbers significantly come down. And I think we are also working with some of the newer customers in terms of factoring without recourse. And they have their own financing companies. So that's why we are confident that we can probably keep this under check. But of course, as the business grows, the absolute number keeps going up.
Understood. But sir, then even if you exclude that, your receivable days would have gone up, right? Even if you exclude this transition.
Yeah. June sales were a little higher. April sales were lower. So this happens always in the first quarter for whatever reason. I am not able to say why it should happen logically. It should not. But what happens is March is a big quarter, right? So most customers would take a little more than what they require in March just so that their ability to exceed their numbers is not impacted for lack of material. And then sometimes they would adjust the April number. And also on top of it, April number is also the industry-related things also will play up. So all of this has played up.
But by the time we adjusted our delivery schedules, etc., it was June. So hopefully, now you will start seeing a routine. So June billings will get paid up between July, August, etc. So if we had one more month, we could have probably been lower. But anyway, that's how the sales profile is. And that's the reason why you see a little more than expected receivables, which in our opinion is a good thing because it shows that there is traction in the marketplace.
Okay. Understood. Thanks. I'll get back to you.
Thanks, Nikhil.
Thank you. The next question is from the line of Aditya Bhartia from Investec. Please proceed.
Hi, good morning, sir. So my first question is on gross margins again. If we look at standalone gross margins, those have not moved up dramatically. On INR 450 crore of revenues, we have somewhat a similar gross margin of 28%. It is subsidiaries with roughly INR 220 crore of revenues, wherein we appear to be making almost INR 150 crore of gross profit, which is almost 68% gross margin. So just trying to understand why is it that margin bump has been so sharp on the subsidiary side, and what is the change in product profile versus the preceding quarter, which is kind of contributing to such a sharp jump?
That's my first question. And maybe I can go ahead with my second question as well. So these deferred receivables of INR 350 crore that you're speaking about are not included in this INR 858 crore, right? This INR 858 crore is pure receivables, which at the end of March used to be, I think, somewhere around INR 570 crore. So there is a significant increase in base receivables also, and that's something that I would like to understand what is really contributing to that.
Sure, sir. Just the last question first. So obviously, we had explained that the June sales were pretty high. And as we go forward, every month, the sale is higher than the previous month. That's the nature of the business profile here. And also, like I said, the other special item of receivables will somehow deal with it in the first half. And then going forward, we are also working with some of the newer clients, especially in the aerospace and all the other more remunerative areas also. We are working with them on factoring without recourse, and hopefully, we will get that successfully done. So what will happen is the additional accrual of sales that happens will not always increase the number of days of receivables. That's one point. The second point is the margin that you talked about on standalone, etc.
So we have several entities sometimes participating in one particular company's one particular product sales. So there are companies which are some portion of the year, one company might have manufactured and then supplied to another company and so on. So after elimination, margins will fall where they do. But you should look at consolidated, and let me explain to you one by one. In automotive, the gross margins have gone up by about 2%. And in electric vehicles, we have a stable profile, maybe 1% or so increase. Industrial, of course, there is a significant increase contributed by certain product profiles. I cannot pinpoint which product profile for obvious reasons, but otherwise, industrial is one area where we are having a good increase. And going forward, you will see increases in railways. You will see increases in aerospace, especially when the quantum of sales increases.
So that's why we are confident that this number is not driven by one product, but by across the different verticals, a series of products, not just one product. So just to explain to you how this entire blended margin works, so the consolidated margin is a blend of all the subsidiary businesses, not really subsidiary legal entities, but businesses. So there will be EMS margin. Going forward into the future, there will be margins from semiconductor assembly, and there will be margins from PC board. And most probably, those margins will be higher than what we do in EMS. But of course, there are other things in those businesses. They are capital-intensive, etc. So when you come to an EMS business, EMS business is a blended margin of different verticals, right?
You have automotive, you have industrial, you have electric vehicles, you have four other places like railway electronics, medical, we have aerospace, defense, and outer space, and then, of course, IT, IoT, and others, and within each of these, there are different product categories that contribute to margins, so if you take automotive, there are switches and control systems, there are dashboards, there are lamps, etc., so similarly, in industrial, there are power products, there are energy meters, there are various other things like equipment, instrumentation, and so on and so forth, in electric vehicles, there are two-wheeler, four-wheeler, etc., so just not to confuse you further on, but this is a blended margin. It's not just that one item that we do has done well, so we've increased the margins.
But since I am privy to all the information, but I am unable to share it by customer, but I can tell you that across the board, we have increased in margins. And that is, if you ask me why it has happened now, because last two years, ever since we listed, I think one of the strategies was to work on cost reductions. So slowly, those cost reduction efforts are also giving us some, let's say, results. And also, if you see the amount of ODM in our portfolio, earlier it used to be 10%, now it's 20%. That means we do have more control on the bill of material on additional 10% of our sales. So there also, the margins are better.
So the ODM, that means our own design, cost reduction with suppliers, different blended products within vertical, and different blend of verticals within the total portfolio is contributing to the positive, let's say, tailwind on the margins this year. And going forward, obviously, the other two businesses will kick in. So you will have multi-layer HDI PCB. They come at much higher margins. You'll have semiconductor assemblies and so on and so forth. And then, of course, add to it the margins of other geographies, like decidedly better margins are there in America, especially for technology products and lower volume products, etc. I cannot go deeper than this on this topic right now.
Sure, sir. And sir, if you could just also tell us the 10% stake that is being given to US T India Private Limited and 8.25% to AOS in the OSAT subsidiary, what exactly is the agreement like? Do we have some off-take arrangements with technology partners as well? Who all are our technology partners on the OSAT side? Anything on that would be very helpful. Thank you so much, sir.
Yeah, yeah. So Aditya, fundamentally, the partnership is like a marriage, right? You need to cement it with some economic benefits flowing to each of the parties, right? So in some cases, if you have noticed, when we acquired the business from this L&T and Fujitsu, we purchased their equipment so that we make sure that they have to come to us as far as that particular product category is concerned. So we invested some money. Similarly, for the others, they are supplying us material, but they are supplying us with critical equipment, which is a bottleneck equipment from their point of view. And we want to cement the relationship, so we offer them skin in the game. But in any case, we will limit the total skin in the game to less than 20%.
The idea is that when we have more and more customers and more and more technology partners on your side, then there is also effort from their side to improve the business prospects. So that's the broad thing. And then, of course, they do come in at a valuation which is low at this point in time, but not lower than what we have invested. And then going forward, they also benefit, and there is a lot of interest in them to move businesses to us and probably even profitable businesses because then they also stand to gain as their investment value also goes up in the company.
And so this is to give them an economic incentive to partner with us and also to give them a slightly better control in the relationship with us. An unfettered relationship generally also means that he can go to somebody else, but a relationship which is bound by investments and bound by some other arrangements is likely to be long-term.
Understood, sir. And they'll also be infusing equity.
Sorry?
Thank you. Sir, I was just asking, they'll also be infusing equity because you mentioned that valuation would not be lower than what Kaynes has invested at. One of them will infuse some equity, UST Global or something. And so that equity, whatever they infuse, is much lower than what eventually the valuation of this percentage wil l be.
So our intention is for them to use us as a technology manufacturing partner for bulk of their activity, especially the newer generation of activity.
Perfect. I understand. Thank you so much.
I can explain to you, I think, since this question is very relevant. We're investing into a company called Mixx Technologies. Obviously, it's a minority investment, and some other rounds, we picked up some stakes. That company is worth a lot more today. They are very near to getting their prototypes out and so on, and they work with large companies like NVIDIA, Meta, Google, etc. Now, from that perspective, that investment which we did about more than a year ago has now paid dividends in terms of strengthening our business portfolio for advanced packaging. Thank you.
Thanks. Thanks, sir.
Thank you. The next question is from the line of Siddhartha Bera from Nomura. Please proceed.
Thanks for the opportunity, sir. Sir, I had some queries on the revenue subsegments. For example, how is the ramp-up in smart meter happening, current quarter and going ahead over the next couple of years? And second is on the EVs as well as on the aerospace and railways because we haven't seen much there happening, at least in the current quarter, in aerospace and railways. So if you can just highlight some of these subsegments, how should we think about the ramp-up for the year?
Hi, sir. So thank you for your question. So smart meters, like we said, we are aiming at about 15% of the total market. And every year, with definitely minimum INR 1,000-1,200 crore of business, we should probably end up doing in that area because there is also a limitation to field implementation and so on and so forth. And also, we don't want it to be a huge portion of our total revenues. So smart meter will now probably it is going at the speed, and smart meter is not a cyclical thing, right? Once you have the order every quarter, you have a fixed amount of implementation, installation, and go live and so on. So that goes by a different this thing.
So as far as electric vehicle is concerned, we got significantly one of the largest two-wheeler manufacturers as a client now, and the evaluation phase is completed last year, and we're getting some very good orders in the two-wheeler segment. And already existing clients are there. And then even in four-wheeler segment, we are working with some of the upcoming model launches, etc. So this quarter, we have worked a lot in terms of getting new customers on board. So you will start seeing some traction in EV. Obviously, EV two-wheeler is a stronger segment at this point in time. And four-wheeler, when it becomes standardized in the country, we probably will also have reasonable traction there. As far as aerospace is concerned, lots of new orders have come in. In fact, from one large client of aerospace, we have got referrals. So we work with three divisions.
One in the automotive components area. The other one will be in one of their U.S.-based businesses. And third is, of course, aerospace. So you can call the first quarter as a quarter where we have got a lot of clients on board. In aerospace, other than this large OEM client, we have got one more big client. I'm unable to give you the name because I don't have the consent, but they are all $10 million initial orders and so on. So aerospace, in fact, the biggest business growth has happened in aerospace this year, even though we are not done billing because billing will start off probably second quarter, third quarter, fourth quarter. As far as railways concerned, the Kavach project, Ramesh ji mentioned, we are into pilot phase, and hopefully, maybe it takes a few months, and after that, we start getting routine orders.
Our design is, of course, based on German technology. There are two German partners for this design. We have also acquired companies like Sensonic in the railway area. Another recent acquisition was also announced. We invested about INR 40 crore of money into another company, which is into railway ODM. Going forward, we will start seeing more and more business as a percentage of total. First quarter, of course, was predominated by automotive, industrial, and EV segments. The second quarter, aerospace will increase so that for the year, you can see aerospace to be about maybe around 8% or so of the total. The railway also should exceed about 10%-12% of the total sales by the end of the year. Of course, it also depends on how well the other segments do.
Got it, sir. And, sir, on the CapEx, sir, if you can highlight the plan.
I would request you to go back to the queue as there are several participants waiting for their turn.
Yeah, so those who are unable to get clarification now, you could set up a call with us, and we can definitely come back to you later.
Thank you. The next question is from the line of Praveen Sahay from PL Capital. Please proceed.
Yeah. Thank you for the opportunity. Sir, can you give us so far how much of the CapEx in the OSAT and the PCB we had done? Just like you had given for the QIP money, around INR 313 crore is already utilized in the OSAT and INR 114 crore for the PCB. So how much of the total CapEx you had done in these two businesses?
Just one second. Yeah. For OSAT, the actual spend so far is about INR 313 crore. We have another INR 443 balance which we have raised in the QIP. Similarly, for PCB, about INR 114 crore have been spent, and, of course, we do have some left with us, but going forward, what will happen? This is a running account, right? So every day, there'll be something or the other happening. The QIP which funded these was the previous QIP, QIP number one. There is at least about INR 1,400 crore.
Yeah. Right, sir. Those things are there. I just wanted to know that there is no government funding so far you had received related to the OSAT? These are the only QIP money you had.
Ha. So what happens is the land and buildings, the government funding is not too much. It's all the plant and machinery normally. And so plant and machinery orders have been placed. The moment they come, we'll start getting government funding. It's already a proven case. I think the other peer groups, if you refer to the other awardees of this subsidies, they all started receiving it. And that is the central government subsidy is pari passu. That means when we raise the order, at that point in time, the funding is done. And the state government one is, of course, based on commencement of production. So that comes with a delay of about six months. So that process.
Okay. Got it.
Yeah, yeah. There's no reason why it's not.
Got it, sir. And one small question, sir, related to the Tranzmeo.
Hello.
Okay. Yeah, yeah. Okay. Cool.
Yeah. We could get into another call later. Please check with Sumit, and then we can fix clarifying calls. It's all there in the public domain, but anyway, we can point those information to you.
All right. Thank you. Ladies and gentlemen, due to time constraints, we take that as the last question. I would now like to hand the conference over to the management for closing comments. Over to you, sir.
Yeah. Thank you very much. And thank you for attending this particular earnings call. And also, I would like to place on record my thanks to Axis Capital team also for enabling so many of key investors and analysts to attend this particular call. And if anybody has, most of the information is already published. If there are any clarifications you require on those, you could reach out to us, and then we can set up a call or a meeting so that we can then explain to you what has happened. Okay? So thank you very much, and all the very best to all of you.
On behalf of Axis Capital Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your line.