Kaynes Technology Acquires Iskraemeco India to Strengthen Presence in Smart Meters

Kaynes Technology, a leading player in India’s Electronics Manufacturing Services (EMS) market, is positioning itself for rapid growth across several high-potential segments, including smart meters, semiconductors, and printed circuit board (PCB) manufacturing. The company has recently acquired a 100 percent stake in Iskraemeco India, a subsidiary of a Slovenian company, which is a strategic move aimed at strengthening its foothold in the smart meter market.

The acquisition deal, valued at Rs 43 crore, gives Kaynes full control of Iskraemeco India, a company that generated Rs 65 crore in turnover in FY24. While Iskraemeco India is still operating below break-even levels, the enterprise value (EV)/sales ratio of 0.7 times makes the deal attractive, especially given the long-term potential of the smart meter market in India. This acquisition aligns with Kaynes’ broader strategy of leveraging new growth opportunities in the evolving smart meter ecosystem, driven by the Indian government’s ambitious Smart Meter National Program (SMNP).

Tapping into the Smart Meter Opportunity
The Smart Meter National Program, part of the government’s larger power sector reform, seeks to replace 25 crore traditional electricity meters with prepaid smart meters over the next five years. The initiative includes modernizing infrastructure such as feeders and transformers, with an estimated total capital expenditure of Rs 1.5 lakh crore. With smart meter penetration currently standing at just 2-3 percent, there is substantial room for growth. The goal is to bring more transparency and efficiency to India’s power sector, and Kaynes sees this as a major area of opportunity.

To capitalize on this demand, Kaynes has set up a dedicated manufacturing plant for smart meters in Hyderabad. The facility has a current production capacity of 1 million units, but the company plans to scale this up to 4 million units in the near future by adding additional assembly lines. This move will allow Kaynes to ramp up its production capabilities to meet the growing demand from government projects and utilities across India.

The acquisition of Iskraemeco India further solidifies Kaynes’ position in this market. Iskraemeco India has secured a significant order from Power Grid Corporation of Gujarat to install 3.5 million smart meters over the next 12-18 months. This deal provides a strong revenue stream in the near term and reflects the high demand for smart meters, driven by government mandates and infrastructure upgrades. Kaynes is also expecting additional orders from the central government as well as from various state governments, which could provide further tailwinds for its smart meter segment.

The smart meter business currently contributes 2-3 percent of Kaynes’ total turnover, but management expects this to increase to 10 percent by FY25, bolstered by its strong order book and recent acquisitions. Over the medium term, the company also plans to expand its portfolio to include gas and water meters, thereby broadening its market presence in utilities.

Deploying Capital for Expansion
Kaynes Technology has been actively deploying capital to fuel its expansion plans. In 2023, the company raised Rs 1,400 crore through a qualified institutional placement (QIP). These funds have been allocated toward expanding its presence in both domestic and international markets. In January 2024, Kaynes acquired Digicom Electronics, a California-based EMS company, for $2.5 million. This acquisition marks Kaynes’ entry into the U.S. market, a key growth area for the company as it seeks to diversify its revenue streams.

Additionally, Kaynes acquired a minority stake in Mixx Technologies, an electronics manufacturing and PCB assembling services company, for $3 million. This acquisition is in line with its strategy to enhance its capabilities in PCB manufacturing, a key area of growth for the company.

In September 2024, Kaynes received cabinet approval to set up a semiconductor manufacturing plant in Gujarat, another significant step toward building a diversified electronics manufacturing portfolio. This new facility will allow Kaynes to tap into the growing demand for semiconductors, both in India and globally.

Strong Order Book and Growth Outlook
Kaynes Technology currently boasts an order book of over Rs 5,000 crore, with a book-to-bill ratio of 2.5x, offering strong growth visibility over the medium term. The management has reiterated its revenue guidance of Rs 3,400 crore for FY25, with an operating margin target of 15 percent. Over the longer term, Kaynes has set a revenue target of Rs 8,000 crore by FY28, of which 75 percent is expected to come from its core EMS business. The remaining 25 percent will be driven by growth in semiconductors, PCBs, smart meters, and the Kavach project (an indigenous safety system for railways).

The acquisition of Iskraemeco India is expected to be margin accretive over the medium term as Kaynes ramps up smart meter production and secures new orders. The company’s strategy of acquiring complementary businesses, deploying capital for capacity expansion, and entering new markets is poised to fuel its growth trajectory in the coming years.

Valuation and Investor Outlook
At its current market price, Kaynes Technology trades at an FY26 price-to-earnings (PE) multiple of 71 times, with a price/earnings-to-growth (PEG) ratio of 1.4x. While the company’s robust growth outlook is priced into the stock, investors may want to wait for better entry points given the elevated valuations. However, for long-term investors, Kaynes’ strong order book, aggressive expansion strategy, and growing presence in high-potential markets like smart meters and semiconductors make it a compelling play on India’s rapidly growing electronics manufacturing sector.

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