💰 Financial Performance

Revenue Growth by Segment

The Digital Transformation segment is the primary driver, contributing 83% of total revenue. Overall revenue for Q2 FY26 reached INR 3,009 Mn, representing an 11.1% YoY growth compared to INR 2,709 Mn in Q2 FY25. H1 FY26 revenue stood at INR 5,971 Mn, up 12.0% YoY from INR 5,333 Mn.

Geographic Revenue Split

While specific percentage splits are not provided, the company notes a strong brand presence in India and is actively investing to expand its footprint outside India. Foreign operations are managed through subsidiaries like Kellton Tech Solutions Inc. and Kellton Tech Inc. (USA).

Profitability Margins

Profitability showed an upward trend in Q2 FY26: Operating (EBITDA) margin rose to 12.6% from 12.1% YoY, and Net (PAT) margin improved to 8.0% from 7.2% YoY. H1 FY26 PAT margin was 7.8% compared to 7.4% in H1 FY25.

EBITDA Margin

EBITDA margin for Q2 FY26 was 12.6%, a 50 bps increase YoY. Absolute EBITDA grew 15.6% YoY to INR 378 Mn. Management has set a long-term target of 20% EBITDA margin by optimizing overheads and leveraging economies of scale in acquired entities.

Capital Expenditure

Not explicitly disclosed in absolute INR Cr for future periods, but the company is deploying funds from the first round of FCCB and seeking a new round of FCCB primarily for acquisitions and working capital requirements.

Credit Rating & Borrowing

The company utilizes FCCB (Foreign Currency Convertible Bonds) for low-cost funding. It also carries promoter loans of INR 22.94 Cr and subsidiary loans of INR 4.58 Cr as of May 2024.

⚙️ Operational Drivers

Raw Materials

As a technology services firm, the primary 'raw material' is human capital, consisting of a curated team of 1800+ employees, which accounts for the bulk of operational costs.

Import Sources

Not applicable as the company is a service provider; however, talent is primarily sourced from India with global delivery capabilities.

Key Suppliers

Not applicable for IT services; the company relies on technology partners for Cloud and DevOps services.

Capacity Expansion

Current capacity is defined by its 1800+ employee base. Expansion is driven by 'team augmentation' and 'curated team' expansion to support new digital transformation projects.

Raw Material Costs

Employee benefit expenses are the primary cost. Total expenses for FY25 were INR 9,702 Mn against a revenue of INR 10,978 Mn (approx. 88% of revenue).

Manufacturing Efficiency

Not applicable; efficiency is measured by project delivery, such as the successful iPaaS implementation across 10 countries and 1,500+ stores for a global food services client.

Logistics & Distribution

Not applicable; services are delivered digitally or through onsite team augmentation.

📈 Strategic Growth

Expected Growth Rate

12%

Growth Strategy

Growth is driven by a two-pronged strategy: organic expansion in Digital Transformation (83% of revenue) and inorganic growth through 'opportunistic buys' of deep tech companies. The company uses FCCB proceeds to acquire firms with single-digit EBITDA margins and aims to scale them to higher profitability within 6-12 months by removing redundant overheads.

Products & Services

Digital Transformation services, Product Development, AR/VR, AI/ML, Web3, Data Analytics, Cloud & DevOps, and iPaaS (Integration Platform as a Service).

Brand Portfolio

Kellton, Kellton Tech.

New Products/Services

Next-generation integration platform (iPaaS) recently implemented for a global food services enterprise; expected to drive recurring service revenue.

Market Expansion

Targeting global markets outside India where brand awareness is currently low, supported by increased marketing spend and international acquisitions.

Strategic Alliances

Not specifically named in the documents, though the company operates as a technology consulting partner for global enterprises.

🌍 External Factors

Industry Trends

The industry is shifting toward AI/ML and Web3 integration. Kellton is positioning itself as a CMMI Level 5 provider to capture high-end digital transformation projects, which currently grow at a 12% YoY rate for the company.

Competitive Landscape

Competes with global and Indian IT service providers in the digital transformation and product engineering space.

Competitive Moat

Moat is built on high-level certifications (CMMI Level 5) and specialized expertise in emerging tech (Web3, AI). This provides a competitive advantage in securing complex, large-scale global contracts that require high process maturity.

Macro Economic Sensitivity

Sensitive to global IT spending trends and digital transformation budgets of large enterprises.

Consumer Behavior

Enterprise shift toward 'Digital First' strategies is driving demand for Kellton's core services.

Geopolitical Risks

Exposure to international trade regulations and data protection laws (e.g., GDPR) across the 10 countries where it recently deployed iPaaS solutions.

⚖️ Regulatory & Governance

Industry Regulations

Compliant with SEBI LODR Regulation 30 for material disclosures and Companies Act 2013 for internal financial controls. Adheres to global data protection policies.

Taxation Policy Impact

Effective tax rate is approximately 17-20% based on H1 FY26 PBT of INR 561 Mn and PAT of INR 468 Mn.

Legal Contingencies

The company reported no pending proceedings under the Insolvency and Bankruptcy Code, 2016. Related party transactions include office rent of INR 2.21 Cr paid to relatives of KMP.

⚠️ Risk Analysis

Key Uncertainties

Equity dilution risk is high; the conversion of FCCB Round 1 into equity resulted in flat EPS (0.42) despite a 23% increase in PAT, impacting shareholder returns.

Geographic Concentration Risk

High dependence on the Indian market for brand recognition, with a strategic need to diversify revenue from international geographies.

Third Party Dependencies

Dependency on specialized tech talent; any increase in attrition could impact the delivery of high-margin AI/ML projects.

Technology Obsolescence Risk

Risk of rapid shifts in tech stacks (e.g., Web3, AI); mitigated by continuous investment in a 'curated team' and deep tech acquisitions.

Credit & Counterparty Risk

Working capital risk due to 'stretched' payment cycles from large clients like LIC, which could impact liquidity if not managed via FCCB or other borrowings.