Ladies and gentlemen, good day, and welcome to Kaynes Technology India Limited Q1 FY 2027 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 this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Nikhil Kandoi from Axis Capital. Thank you, and over to you, sir.
Thank you, Nirav. Good morning, everyone. On behalf of Axis Capital, I welcome you all to the Q1 FY 2027 earnings con call of Kaynes Technology India Limited. Today, we have with us management represented by Mrs. Savitha Ramesh, Chairperson, Mr. Ramesh Kunhikannan, Executive Vice Chairman, Mr. Muthukumar Narayanaswamy, Managing Director, and Mr. Jairam Sampath, Whole-time Director and Chief Financial Officer. Now, I will hand over the floor to the management for the opening remarks, post which we will open the floor for Q&A. Thank you, and over to you, sir.
Good morning, Nikhil. Thank you, Nikhil. Good morning to everyone, and thank you for joining us. On behalf of Kaynes Technology team, I would like to welcome all of you to our Q1 FY 2027 earnings call. Joining me today are Mrs. Savitha Ramesh, Chairperson of our board, our Managing Director, Dr. Muthukumar Narayanaswamy, Mr. Jairam Sampath, Whole-time Director and CFO, Mr. Sumit Verma from our investor relations, and MUFG IR, our investor relation partners. Let me begin with a brief overview of our financial performance for Q1 FY 2027.
Our total revenue stood at INR 946 crores, reflecting a year-on-year growth of 40%, which is largely driven by EMS business. EBITDA for the quarter was INR 147.6 crores, translating into an EBITDA margin of 15.6% and 31% year-on-year growth. We have a robust order book of around INR 9,000 crores. 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 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 progress to investors, customers, and partners through visible measurable delivery rather than commentary. That focus comes directly from listening close to you. Following our quarter four and full year FY 2026, several of you raised fair and direct questions on the gap between our stated aspiration and delivered performance, on the pace of our working capital normalization, and on the clarity of our communication. We took that feedback seriously, and it has shaped exactly how we have operated this quarter.
Our two strategic growth engines, Kaynes Semiconductor and Kaynes Circuit, remains 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. 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, diversifying logistics routes, building strategic inventory on critical components, and working closely with equipment vendors and alternate schedules.
Both Kaynes Semiconductor unit two and Kaynes Circuit Chennai remains on the track to be operational by quarter three FY 2027, and we will continue to update you transparently on our progress every quarter. 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 wins and recognitions this quarter, our leadership and sustainability initiatives, 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.
He will close, as I will too, on why balance sheet strength stays 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. The world we operate in, electronic semiconductors and EVs, space technology, is moving faster than it has ever, and the competitive set we are up against in India and globally is 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. 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. The domains we are scaling into semiconductor packaging, PCB manufacturing, space technology aren't just important to Kaynes. They have foundational to India's ambition in electronics and deep tech manufacturing, and being part of building that capability is something we take seriously. That said, work this new comes with a learning curve, and we won't pretend otherwise.
What we can commit to is this, that we are learning quickly, converting those learnings into better execution the next time, 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 holding ourselves to. 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 details. Thank you. Over to you, Muthukumar.
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 about our revenue growth and EBITDA, how we have performed, and also what are the strategic initiatives. Achieving a 40% year-on-year growth in the Q1, and looking at the numbers, this has been specifically come with the reduction in the growth of about smart metering business when compared to Q1. We have taken the feedbacks of various stakeholders and looking at the current situation of our balance sheet and considering shares, we have taken a conscious decision of growing more in EMS business, which is our traditional and core business, and 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 a collection first to make sure that we continue to supply. The current situation in the places where we are doing the installation of meters due to the natural calamity of floods, which has also impacted this by keeping everything our objective of bringing the balance sheet to a better shape, we de-grown.
Our team of the leadership team, the operating team, did an excellent job of growing in the EMS business. Standalone as an EMS business growing much, much higher than the 40% overall growth. There was a promising top-line growth, we agree, but as Mr. Ramesh said, we at the Kaynes and our Board of Directors doesn't look at for a quarter-to-quarter, but for a long-term strategy.
When the growth is good, we also see the impacts on margin due to cost escalation driven by global supply chain issues and the macro factors such as rise in the energy and the crude prices, the commodity prices, and the Forex movement, which in turn led to a rise in the commodity prices. We expect this could take couple of quarters and profitability to normalize and return to the levels as we had earlier committed to. Yes, Kaynes did good in the quarter of things, but this is due to the strategic initiative of understanding the market is going to go like this. The management team took a decision to pull forward and keep the materials ready.
There is a sharp increase that's happening in the entire supply chain, which is leading to lead time for supply to the extent of more than six - eight months in some categories. The management team has already taken initiative to ensure that enough materials on the pipeline is available with us to take care of the business commitments for the future quarters. While one of the questions that has been asked by you is are we growing in the EMS business? I have answered it, yes. Even when we have de-grown the smart metering business, we continue to grow on EMS business. I'll talk to you about smart metering business for a while before I go into the new customers. Turning into smart metering business specifically, growth here was flat to negative this quarter.
This was compounded by an impact on installation due to the flood situation at our plant earlier. In terms of working capital, even though the number of days has moved from 190 days for the quarter standalone, if you look at the 12-month rolling, it is about 163 days. I wanted to emphasize that in terms of the EMS business, the team did a good job. If you look at the total sales of about INR 942 crores, the revenue that has come from the EMS business is INR 854 crores, that is including GST. The team did a remarkable job of collecting INR 847 crores, thereby ensuring that one of the highest collections in this quarter.
The sales in our GridCrest, which is a metering business, is about INR 240 crores, whereas our collections is INR 88 crores, which is what made us to take a decision to stop productions and supplies, which will have a reasonably a better cash flow. Having said that, we have taken up at all levels in the GridCrest business, though late, we have got about INR 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 end of the financial year, we'll turn the cash positive, we're pretty confident on this.
Our inventory levels in terms of the working capital has gone up by about INR 150 crores, as I said, this a strategic decision that we took in the month of February, looking at the global market situation and the volatility. Just because our team has added upon the inventory there, we could able to successfully grow at 40%+ as a overall, EMS business alone are about 48%. 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. I'm happy to say that that business also helped us to come to some normalcy, and about 30%-40% of the business has been executed in the last quarter, which you can see the increased growth in the various segments, which we'll talk about.
Going forward, we'll also be providing you the rolling 12-month view of these metrics on receivables or payables or net working capital rather than the quarterly average, so that you all get a picture of the long-term growth. On the existing business, I also wanted to bring it to your notice that the receivables from our leading electric vehicle two-wheeler customer, thereon most of you raised the concern, has come down significantly to below INR 100 crores thanks to the continuous efforts of management in working like a partnership with the customer to bring back the money that what we have. Having talked about the balance sheet, as Mr. Ramesh, our Executive Vice Chairman said, we strongly believe that P&L is very important, balance sheet is going to be clean.
Going forward, we'll continue to spend and ensure that the team works making a balance sheet much, much better than what we are doing now. Moving into the new business, let me talk about the new business and logos that we added to our portfolio, along with an update of existing logos and their impact on our business going forward. We added one of the India's second-largest two-wheeler electric vehicle manufacturer to our existing EV portfolio. The team did a remarkable job of completing the product development testing in a record of about eight months, and now we started serial supplies to this. Along with this, we have onboarded global brands from Germany and France, one of the India's leading wireless communication company, and a handful of other new logos together.
Both our automotive team and non-automotive team are doing an excellent job of bringing more than in a quarter of about 90 days, and wherein we had a working day of 75, we had more than 72 customers who have walked into our company, which talks about the customer confidence into our company. I'm pleased to share that one of the biggest achievement 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.
We got a best award from Siemens, the Top Supplier Recognition Award, and of course, Development Partner Excellence Award, which gives them a confidence to tell how our customers believed in us. Of course, we made some more on the best delivery and development support. We also wanted to highlight Kaynes' commitment to building our next generation leadership team.
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 a high potential talent to the next level of challenging leadership role. 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're actually working with the government of Karnataka on a research land, which is about 20 kilometers to our facilities in Mysore, to plant 10,000 trees across 20 hectares of land, contributing meaningfully towards the environment. We also plan to increase our consumption of renewable energy as a power source for our factories to 3 gigawatts from solar. Installation is in progress, leading to 23% reduction in energy intensity in last two years.
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. 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. It's a good EBITDA margin business, and we are hopeful that growth will accelerate into our overseas business going forward, and also bringing in more value addition to India.
Not just from our subsidies, but also increasingly export-oriented business as well, with the key global players like Honeywell, Otis, Eaton, and many others. Let me turn to the newer business, OSAT and PCB. I'm sure that everyone is looking at this. I want to specifically congratulate our subsidiaries head for taking the commitment across all the levels. The team is working extensively to make sure that our commitments are honored.
The CapEx done in FY 2026 was INR 473 crores for OSAT and INR 324 crores for PCB. Our current goal is to CapEx at about INR 300 crores for OSAT and PCB. As I said earlier, with the subsidies coming up, we'll be funding more, and as and when we have more customers, we have more. Cash is not a constraint here. We want to make sure that the modular investment to make sure that we have checks and balances on our CapEx spending and revenue. Happy to say that we also received a government subsidy to the tune of INR 170 crores in OSAT business till July 2026. On OSAT specifically, our partnership between Mitsui and Kaynes Semicon is a major milestone of our subsidiary.
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. On the PCB front, we are seeing a strong traction and interest from the global players. You all know that the market, when it becomes volatile and when it becomes the supply chain lead time is more, PCB is one component where it is getting into the global shortage at this point of time.
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, and our team is doing the last-minute finishing of the capital, and we are on track as per our commitment. We're also happy to say that we have a recent engagement with one of the largest EV manufacturers globally in the automobile sector, and the team had come to our plant, visited, and has given a very positive feedback on the capabilities we are going to work with on the global standard.
In fact, we are now very close to closing the deal, which once finalized will be a significant validation on the quality and scale of what we have built here. 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. Let me also give you an update on our space technology initiative.
Our first three satellite is currently in the prototype development phase, and we expect it to be ready to launch in mid of next year, 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 one development satellite, but getting into establishing Kaynes' capability into the emerging satellite electronics domain and opens the door for broader participation in India's space technology system. Alongside this, the request of ISRO, our subsidiaries Cryo Precision Technologies and Aerocaliph Components are entering into titanium gas bottle manufacturing to support their flight program, and DRDO has a similar requirement for gas bottles across several of their Naval projects, which 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 by-product of the growth. The discipline now across the organization will definitely bring us to the commitment what we have given. Looking ahead, the key priorities what the organization said, I just want to reiterate, NPD and value-added product, a product-led solution there is rather than the service-led solution, of course, the next strategic frontier for Kaynes and our operational excellence.
Operational excellence, quality, and disciplined capital allocation remain the foundation we are building it on. I know last couple of quarters have tested your confidence and our commitment to keep earning it back and consistent delivery one quarter and quarter after quarter every time. With this, I complete my initial remarks. I would like to thank you Axis team for hosting this earnings call and all of you who are joining today. I'll now hand it back to the question- and answer session. Thank you very much, and over to you, Nirav.
Thank you. We'll now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone 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'll wait for a moment while the question queue assembles. Participants, you may press star and one to ask the question. First question is from the line of Renu Baid from IIFL Capital. Please go ahead.
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 if you mentioned somewhere in the call that EMS grew 48% during the quarter? Can we just clarify on that first element?
Yes. The overall-
What was the growth of the solar or metering business that we have?
The overall business growth is 40%, the metering is 38%, so the total growth is more than 48%.
Got it. While operating performance has been pretty strong, given the increase in inventories as well as working capital, our PBT margins have been much softer. 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 line is intact or it's a significant drain out there. Third question aligned to this is, while smart metering, we have consciously scaled it down because of working capital issues and concerns. It's been almost two years and the net profitability or expectations returns from this business has been suboptimal.
Any thought process does the management have to correct the strategic decision that we had taken two years back? Any views in terms of opportunities to divest this business in future? Some of the utilities are looking to buy out the metering businesses. What would be your thought process on this side to relieve both the working capital and management bandwidth from the smart metering direct B2C portfolio that we have here?
I'll answer you one by one. I'll take the PBT or PAT for our comparison at this point of time. The other income that used to come to us earlier from our PIP fund, where the investment has come in, it dropped about 2.5 points on our PBT or PAT. That's one of the major reasons. Other than that, if you look at our depreciation has gone up with the various investment that's coming up, whereas revenue needs to come. Look ahead in the next two quarters, I think this will start coming back when we are going to generate revenue from our Kaynes Semicon and Kaynes Circuits and of course some of the programs that is running currently. The second question is what you asked specifically on the metering business.
As we said, we have embarked in this journey of metering business, which has given a very good visibility on our ability to develop a product and launch it to the customer. Today, though we are not able to make a better receivables on this, I want to reiterate amongst all the metering companies which are doing assembling, we continue to be the number one installation done across the country than our any other competition. That's not our objective. We wanted to make sure that we reach always the best.
You are right, we are now centering and consolidating our operational performance in metering, which is core. Of course, we understand the challenges, which is alongside of installing a meter and getting it in over a long period of revenue. The management is seriously looking at options and opportunities available. Whatever the methodology we told, I don't want to commit at this point of time, as we committed in the February earnings call, you will hear more from us about our strategy to de-risk the receivables portions of the metering business.
Sure. 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? Thank you.
Our commitments, 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. We are committed to that. The project is on track. I want to specifically put on record thanks to my team in both who are working day and night to make sure that this happens. Our customers' validation is over in both in the semicon project, whereas both our project is starting now. We are very confident that we'll be doing this.
Thank you.
Added to what Dr. Muthukumar told, our OSAT, all the trials and validation is getting over now. We will start the commercial bookings. As far as PCB is concerned, our entire capacity is being requested by one large player, a global player. Their trials are going on in our factory as on today, as we speak. They have also approved and given us a vendor code for that.
Super. Thank you, and best wishes to you.
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 Siddhartha Bera from Nomura. Please go ahead.
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? Second is, how much will be the smart meter revenues in the current quarter which we have booked? Apart from that, sir, in terms of new order wins, if you can share some more color. We did get about INR 1,500 crore of new orders. If you can share some color about which are the key customers there and the key order wins quantum which we have got in the current quarter.
See, we normally don't share the revenue with segment wise and vertical. 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. Our overall revenue for this quarter is about INR 946 crore, on which our sales did INR 946 crore is without GST. Our sales is about INR 210 crore in metering business, and the rest all is in the EMS business. 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 next two questions of who are the new logos that we have added up. 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 prototypes have been finished up and serial production has started now. The global players, we already told you. Last quarter, we said our aerospace business is not picking up because of the global situation. We're very happy to say that this quarter we have come back very strongly and the customers' PPAP and all is going on.
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. For your exact point on the growth percentage in the standalone EMS business, which is other than metering business, if you take it, of course, other than foreign entities also.
Because our acquisition of the August Electronics was done only in July. Last year, first quarter it was not there. As a standalone EMS business, if you see, our growth is 53%, from INR 418 crores of last year to this year of INR 639 crores, standalone EMS business. My overseas entities, if you take from INR 24 crores last year to INR 102 crores, we have grown at 327%. There is a new acquisition that happened. As a metering business, last year first quarter, our sales was INR 231 crores, and this year it is INR 204 crores, which means a - 12% growth. That takes us to 40% overall. Hope I have answered your question.
Yes, sir. Thanks a lot for this. Would it be possible to share the cash flow from operations by the end of first quarter?
Okay.
Yeah.
At the end of first quarter, I think, as we said, our inventory has gone up by INR 177 crores we have added up. Receivables we were short by INR 68 crores, taking it to about a total of about INR 259 crores as a negative cash flow. Okay. Having said that, the first quarter is 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 INR 379 crores.
The team did a remarkable challenges in doing this. Except for the inventory, I think the receivables, the negative was only INR 90 crores, mainly because of this metering. In terms of EMS business, the team has did a extremely good job. Inventories is a strategic division. We have improved on our commitment, whatever we have told, and we will ensure that going forward, our commitments of last quarter, the reversal is going to happen.
Got it, sir. Thanks a lot. In OSAT and PCB put together, what has been the total investment till now? And, for this year, how much investments are you planning to do?
As I said, at this point of time, the total capital that we have spent between these two entities, just give me a minute.
Muthu, it is around INR 1,200 crores. Both put together.
Yes. Right.
Yes. Both put together is INR 1,200 crores, maybe about INR 700 crores in OSAT and INR 500 crores in our PCB. We have in transit around INR 250 crores of items which are yet to come.
Thank you. Send us a request to come back for a follow-up. A request to all the participants, kindly limit yourself to two questions per participant and rejoin for a follow-up. Next question is from Santhosh Seshadri from Avendus Spark. Please go ahead.
Yeah. Hi, good morning. Thanks for taking up my questions. My first question is on the smart metering business. Sir, how do you think about this business internally? Do you see this as an extension of this EMS business, or do you think that's a completely different ballgame? In the past, you have spoken about the shift from service model to a product model. Can you shed some light on how this shift is tracking?
Are you on track to move towards the product-based model? 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? 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?
Thank you very much, Sir. You have given us all the clues on how to do that. I'll tell you, Sir, the metering business we acquired about two years before, and three years to that we were a supplier to that company as a PCB assembly. 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. One is manufacturing of meter, and two is installation of the meter and doing the services for over a period of eight years to the government.
Kaynes is always very strong in its forte of manufacturing. When we are talking about the revenue of EX, 60% of the revenue or 65% of the revenue comes from the EMS business. We still consider this helping us our EMS business to grow, then 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 reasonably good for a company which taken into this initiative one year before.
If you look at Kaynes has a very distinct and strong advantage of the company, which has got manufacturing of meter, a capability to install meter and have a software integration capability, 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 at one shot. These are the distinct advantage.
The business model is little long because there is a part of CapEx model and OpEx model which is impacting the receivables. Our strategy to do this is how do we consolidate revenue? We are still making the revenue of 60% - 65% on this because of our EMS business. Like what you said, we have plans of various business model of divesting this other portion of its service provider separately and making sure that the receivables from that is not impacting directly into our balance sheet.
Having said that, it's not a simple thing that we need to do. We are working on this model. As we committed, we come back by our February month on our strategy to see how we are going to manage this business. We are pretty confident that we will be able to do the turnaround by end of this year in terms of receivables from the metering business.
Understood. Thank you, sir. Just one more question?
You can also understand the management commitment to this. We have enough order book available in this metering business. We could have done more revenue, honestly speaking. Just to make sure that the discipline of the balance sheet, we have controlled our revenue growth in this area. It's a very challenging time, but we want to be doing that and taking the discipline.
On the part of question where you mentioned that, how is the shift from service model to supply model, how is that tracking?
We have done Muthu, I'll take it.
Yeah.
We have done all the pre-requirement study, everything. We are working with some partnership with many people, nothing concrete has yet happened. You will hear in the coming quarters, may not be in the next quarter, third quarter, we will have some clear idea on it.
Thank you, sir. Just one more question-
Thank you. We interrupt Santhosh. Kindly come back for a follow-up, please. Thank you. Participants, please limit yourself to two questions and rejoin for a follow-up. Next question is from the line of Achal Lohade from Nuvama. Please go ahead.
Morning, sir. Thank you for the opportunity. My first question is, if you could help us with the absolute figures of the receivables, trade payables and the inventories as of June. I'm just giving a like to like number, what it was in March 2026, so if you could give a similar number. The receivable was INR 1,528 crores in fourth quarter. If you could help us with the absolute figure. Did I hear it right, you said the OCFO was negative INR 248 crores. Have I understood right for 1Q FY 2027?
You're right. Tough quarter.
Okay. If you could help us with the absolute figures of inventories, receivables, and payables, sir.
Okay. I think on terms of receivables, I'll start with this. We started this quarter with about INR 1,765 crores in total, including current and non-current assets, and that has gone to INR 1,925 crores. Okay. Though our receivables in EMS, we started with INR 606 crores and ended up with INR 613 crores, which means we did almost all the collections, including the GST amount. In metering business alone, it went up from INR 1,158- INR 1,311. I think that is what took us a decision to reduce the top line in that business.
Correct. Secondly, with respect to the revenue growth, in the previous calls, you kind of indicated that 30%-35% kind of a growth. Given what we have done, given the strategy we are playing with, what is the revenue growth we should kind of pencil in for FY 2027? How do you see the scale-up for OSAT and PCB for FY 2027 and 2028? Those are my two questions. Thank you.
Sir, revenue growth, we have committed with 2x of the market growth. The first quarter, the market has grown at 17%. We have grown at more than 48% in our EMS business. We don't want to give an absolute number because there is so much volatility in the market. The availability of material in this quarter and next quarter is going to have a huge impact into this business.
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 very committed people, we are quite confident of achieving twice the market growth. This is what the commitment we are giving, we are working towards this. As far as OSAT and PCB is concerned, we already told from third quarter revenue starts in both the business. We have committed a full year revenue of totally INR 450 crores between both, which is what we are targeting at this point in time. We are on the target.
Thank you. Achal, I'll request you to come back for a follow-up. Next question is from Praveen Sahay from PL Capital. Please go ahead.
Thank you for the opportunity. My question is related to the components. As you also touched upon and given some detail in the presentation. The prices for components has been raised on the average of 30%-35%, even the lead time has increased. Can you give us some color on overall your business, how much of this cost inflation has already been captured in Q1? In the coming year, how much we will see the impact of that? Is there any margin compression we are expected to see out of this?
I'll touch base, but I think I would allow Mr. Ramesh to talk about it because of his huge experience in this business. Split this into two, PCB and other components. Other components, as you rightly said, the prices is going up by 30%-35%, and PCB is the one which is challenging today, because even order booking is gone with an advance payment. That's the level that industry is going on, and there is a huge shortage that is coming in.
Like how chips has controlled the manufacturing about three, four years before, 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 when compared to the last year, this year is about 3.3% of our import level, what we are doing on the EBITDA impact. As I said, because of the strategic initiatives that have been taken to build up the inventory, the impact was very minimal. We also have a very good system of back-to-back working with customers in most of the centers that is getting added up.
However, the other cost estimation, which is consumable, 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 and thereby reducing the cost. The market is quite challenging. Looking forward, it is going to put a pressure on the bottom line in the coming quarter because there is a huge impact that is happening. One is availability, second is the price. With that, I would request Mr. Ramesh to give more insight into this.
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. In the past, we have done this, and we are very confident of overcoming this. Though our pricing are all passed on, we may not get it immediately in that quarter, in the coming quarter, because it is normally adjusted quarter on quarter. That's the update I wanted to give you all. As he said, PCB business, the PCB prices have gone up three times. 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% only. Availability has become a big problem.
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, there is a shortage of material as well. Do you expect in the coming nine months, we will see the gross margin compression because of that?
This year is a difficult year, I don't think for us, whatever we have planned, we will try and meet the requirement. It is not going to be an easy year. It is going to be a tough year.
Thank you. Praveen, I'll request you to come back for a follow-up. Next question is from Indrajit Agarwal from CLSA India. Please go ahead.
Hi. I have two questions. First, if you can give the console CapEx guidance for FY 2027 and FY 2028.
Sir, we have communicated and we are standing by that. We said we will be funding for this CapEx for this year is about INR 300 crore for OSAT, INR 300 crore for PCB, and about INR 250 crore for EMS business. We are on track for that. The first quarter spend is about 90 + 90, 180 + 50, INR 230 crore all put together. We also said that fund is not a problem, and as and when we get the newer business, the modular capacity expansions will go on. Also as and when the subsidy is coming, it will keep flowing with the system. This is just to keep a tight control on the cash flow. We are on track of whatever we have committed during the start of the year, and we'll be working towards that.
Sure. 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 a lot more, CCL and other commodities. You mentioned that you have contracted your entire quantity with an overseas customer. What are the pricing or margin contracts over there? What kind of ROCs or margins are you comfortable to generate from that?
I leave Ramesh ready to answer.
See, this is too early to talk about these things. However, I don't agree that margins in PCB companies have come down. As we catch up with the team this last quarter, that is the second quarter of their financial year, they have all done fairly well. This PCB crisis is going on for last three, four months. It is too early for me to give any clear direction on this. The top lines will go up, bottom lines will get affected is what RBI and everybody is projecting. With that, I wanted to stop here.
Thank you. Indrajit, I request you to come back, please. Next question is from line of Sonali Salgaonkar from Jefferies India. Please go ahead.
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? The second question is on the tax rate. It's quite high this quarter at about 35%, correct me if I'm wrong. For the full year, should we expect it to normalize or stay higher than last year? Thirdly, on the OSAT and PCB, while I understand that you cannot name the customer, but just a broader idea that whenever the project commissions, you mentioned that some of the timelines are being followed up. Where do you expect the off-take to go, to domestic customers or to international customers? Thank you.
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 we've taken in February to import more material and keep it in our system. We actually anticipated a little more to go, but because our revenues have been good in the revenue segment, it has come down a little. I wanted to hear your second question again. Can you just repeat your second question?
Sir, with the first question, I also did ask about the debt on the balance sheet. The second question was about the tax rate.
If you look at the tax rate, the effective tax rate for the company is around 32% and odd. Our total debt is, I think, Senthil, can you just tell it's about Senthil, you are there?
Senthil, sir.
Sumit, is Senthil with him?
Yes, sir. I am here.
Yeah, tell me, Senthil.
Yes.
On debt-
Effective tax rate.
He's about to answer.
Yeah.
Sir, I'll go first.
Okay.
Effective tax rate is around 23%, and at the consolidated level, it is at 35%. The work for this is like amortization, whatever we are doing for the intangibles. That is around 3%. The others, whatever, like semicon and circuits, whatever the intercompany interest, whatever we are charging off that is getting capitalized, that is around 5%. The other loss-making entities are contributing to around 4%. This is majorly the contributors to the impact of the higher effective tax rate.
It will be-
The debt on the balance sheet, sir.
Back to you.
Sorry, I couldn't hear you.
Any other questions that you have, Sonali?
I think so on the debt part, we don't have the number right now, is it?
We have the number. The debt-to-equity ratio is good at about 0.3% at this point of time. The exact number, I'm not able to tell, around INR 800 crore total, I think the team is picking it up. We are very well in control. Even for the approved loans for our long-term capital in Semicon and Circuits, we have not taken at this point of time. We're going through the internal funding, you all know.
Thank you. Sonali, I'll request to come back for a follow-up. Next question is from line of Aditya Bhartia from Investec India. Please go ahead.
Sorry, sir, I didn't hear it properly. Was the net debt number that you spoke about around INR 800 odd crore? There were some disturbance, I couldn't hear.
Yes, approximately, but I think I'm just looking at from the finance team there. It's around that number. We can give you the exact numbers soon. You can go to the next question.
Okay. On the cash flow from operations side, we are speaking about roughly INR 260 crore of negative OCFO.
Yes.
I guess there would have been around INR 100, 150 odd crore of CapEx this particular quarter, including the new businesses. Is that understanding correct?
INR 160 crore is the CapEx for this quarter. INR 180 crore, sorry.
INR 180 crores. Still, sir, the net debt number appears to have increased much higher than what it should be. Just kind of wondering how the reconciliation can happen.
Sir, we have. When I said operating cash flow is INR 278 crores.
Sorry, sir.
I said only operating cash flow, consolidated cash flow at that. My cash profit is about INR 158 crores. My inventory gone up by INR 156 crores. My receivables have gone up by INR 90 crores and others about INR 144 crores. Tax at INR 26 crores. My fixed asset is INR 360 crores. The investment is INR 311 crores, INR 317, and of course, financing is INR 263. Those are the numbers for the consolidated cash flow bridge. What I said, INR 259, is that the net cash used in the operating activities.
Understood, sir. 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? How does the pass-through exactly happen? Because my understanding was that at least in the PCBA business, it is more almost like an immediate pass-through. 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.
Sir, it's like what Chairman said, I wanted to reiterate the point. It's a challenging time. We need to make sure that we have the balance between sitting this off and also grow and service the customer. If we are not going to service the customers, and if they are going to fail, it's going to impact us also. We are working very closely with the customer. We have a strategy top customer , wherein we have an understanding with them on an agreement like this on how we can move forward, because a delayed decision-making will have an impact on the business continuity, and also, we don't want the customer line to stop.
We have got an agreement with various customers on where all we can go up to, what level we can go, and the decision can be taken at our level, and also where the customers also have been talking to us frequently and ensuring that the decisions are given fast. Our aspiration and our working is towards not to have any impact on the bottom line. Having said that, there'll be some timing delay between this, which will have an impact. One thing that we can assure you is, yes, we will be definitely faster than our peers in the industry, and we'll ensure that the minimum impact is there.
Thank you very much.
One another point, it is a global problem. The entire industry is aware of it. This has been going on for last three, four months. I am also surprised if nobody has addressed this.
Thank you very much. Aditya, I'll request you to come back. Next question is from line of Praveen Sahay from PL Capital. Please go ahead.
Thank you for follow-up. My 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?
Sir, normally we don't give sector-wise or segment-wise, rest said we have a very good order book, in the first quarter, our team has added more into the order book than what we have opened up or what we have delivered. Very strong order book of more than about INR 8,900 crores is in the system, things are shaping up much faster. In spite of the global situation on the commodity availability, on the other side, with the price escalation is going on, the customer offtake at this point in time is pretty good. 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 of time, and it's still growing strong. 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. We don't see anybody saying that we are going to cut down, including the public sector enterprises or the government.
Okay. Thank you, sir. Thank you.
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.
Once again, we address this. Thank you very much for your time and confidence to us. We tried to answer most of the questions what you have asked for to your satisfaction, reach out to us in case you need any concerns. For few of the questions, the specific questions you've asked, our investor relations team member, Sumit, will reach out to you with the details. We really appreciate your support and continued commitment onto the team. Your support is what making us to grow faster and at the same time, sustainable growth. Thanks to you, thanks to my leadership team, thanks to my operating team who has been staying strong during these difficult times and making our company from good to great. Over to Mr. Ramesh there for final closure.
Thank you to one and all having interest in our company. We are continued with our commitment, the days to come are challenging, but you will see good results. Thank you.
Thank you very much. On behalf of Axis Capital Limited, that concludes this conference. Thank you for joining us, you may now disconnect your lines. Thank you.
Thank you.