The conference call held on October 4, 2024, by Kaynes Technology India Limited primarily focused on their acquisition of Iskraemeco India Private Limited. Here are the key points and updates:

About Kaynes Technology:

Kaynes Technology India Ltd is an Indian electronics manufacturing company that specializes in offering end-to-end solutions in Electronics System Design and Manufacturing (ESDM). Founded in 1988, the company provides services across various sectors, including industrial, automotive, aerospace, defense, medical, and railways. Kaynes Technology is involved in designing, prototyping, and manufacturing printed circuit boards (PCBs), as well as offering product lifecycle management, including testing and after-sales services.

Headquartered in Mysore, Karnataka, the company has multiple manufacturing facilities across India. Kaynes also emphasizes R&D and innovation, with capabilities in areas like IoT (Internet of Things), embedded systems, and automation. The company went public in 2022 with an Initial Public Offering (IPO) to fuel its expansion plans.

Acquisition Overview:

• Kaynes Technology acquired Iskraemeco to strengthen its position as a leading manufacturer of smart meters in India.
• This acquisition is part of Kaynes Technology’s strategy to secure a significant share in the smart meter market, aiming to become the largest EMS (Electronics Manufacturing Services) provider for smart meters.
• Iskraemeco has existing contracts for smart meter installation, including a significant 3.5 million meter order for Gujarat (PGCIL) and other orders in West Bengal.
• The acquisition will enable Kaynes Technology to access new technologies and scale up its manufacturing capabilities for various metering solutions, including gas and water meters.

Market Opportunity:

• India’s smart meter market has a large potential, with approximately 110 million meters yet to be awarded.
• Kaynes Technology aims to leverage this opportunity by working with multiple Advanced Metering Infrastructure Service Providers (AMISPs) and offering smart meters to various sectors.

Financial Impact:

• The acquisition is expected to be margin-accretive and will add scale to Kaynes Technology’s operations, with Iskraemeco’s existing business contributing to revenues.
• Currently, around 10% of Kaynes’ revenue comes from smart meters, and this proportion is expected to grow as the company ramps up production.
• The total orders for West Bengal are expected to be substantial, though specifics will be confirmed once back-to-back contracts are finalized.

Execution Plans:

• Kaynes Technology is setting up a new factory in Hyderabad with a production capacity of 4 million meters annually.
• The company has a strong working capital management plan, ensuring that its working capital cycle does not exceed 90 days.

Competitive Position:

• Although competitors like Genus Power are significant players in the smart meter market, Kaynes Technology is confident of increasing its market share through its advanced manufacturing capabilities and technology integration following the acquisition.

Financial:

Kaynes Technology India has shown robust financial performance in FY 2024. The company reported consolidated revenue of ₹18,046 million for the year, reflecting a growth of approximately 60% compared to FY 2023. This growth is largely driven by its diversified portfolio, with significant contributions from sectors like automotive, industrial, and electronics, which together form a substantial part of its business.

Its net income for FY 2024 stood at ₹1,833 million, nearly doubling from ₹952 million in FY 2023, demonstrating a remarkable 90% growth in profitability. However, its gross margin dropped to around 26%, down from 30% in the previous year, which the company attributes to a shift towards higher-volume sectors with lower margins, such as automotive and industrial.

Kaynes continues to expand its operations, with new facilities in Telangana and overseas expansions, particularly through acquisitions like Digicom Electronics in the U.S. These initiatives are expected to strengthen its position and bring further growth in both domestic and international markets.

For the upcoming years, Kaynes expects a return to higher margins as it balances its portfolio between high-volume, lower-margin sectors and more profitable verticals like aerospace and medical technology. It is also aiming for an operational EBITDA margin of about 15%, with plans to increase its production capacity across various facilities.

Conclusion:

Kaynes Technology is known for catering to both domestic and global clients and is a key player in India’s electronics manufacturing ecosystem, contributing to the country’s push towards “Make in India” and self-reliance in advanced manufacturing. This strategic acquisition of Iskraemeco by Kaynes Technology makes it one of the prominent  player in the fast-growing smart meter market, with both domestic and international growth prospects.