Kaynes Technology India Limited (KAYNES) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Kaynes Technology India Limited Q1 FY '27 Earnings Conference Call hosted by Axis Capital Limited. [Operator Instructions] 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 '27 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'll hand over the floor to the management for the opening remarks, post which we'll open the floor for Q&A. Thank you, and over to you, sir.

Good morning, Nirav. 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 '27 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 Relationships; and MUFG IR, our Investor Relations partners. Let me begin with a brief overview of our financial performance for Q1 FY '27. 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 4 and full year FY '26, 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 look -- we took that feedback seriously, and it has shaped exactly how we have operated this quarter. Our two strategic growth engines, Kaynes Semicon and Kaynes Circuits remains a key management focus. Like the rest of the industry, we saw some disruption this quarter from the escalation in the 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 Semicon Unit 2 and Kaynes Circuits Chennai remains on the track to be operational by quarter 3 FY '27, 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 is nonnegotiable 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. And 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're 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, and 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 a reduction in the growth of about smart metering business when compared to Q1. We have taken the feedback of various stakeholders. And looking at the current situation of our balance sheet and centering it, we have taken a conscious decision of growing more in EMS business, which is our traditional and core business, and we have degrown 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 flood, which has also impacted this, but keeping everything we -- our objective of bringing the balance sheet to a better shape, we degrown. But our team of the leadership team, the operating team did an excellent job of growing in the EMS business, stand-alone at 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. But 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 a 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 to eight months in some categories. And the management team has already taken initiative to ensure that enough material from the pipeline is available with us to take care of the business commitment for the future quarters. While one of the questions that has been asked by you is, are we growing in the smart -- in the EMS business, I have answered yes. Even when we have degrown the smart meter business, we continue to grow on EMS business. I'll talk to you about smart meter business for a while before I go into the new customers. Turning into smart meter business specifically, growth here was flat to negative this quarter. This was compounded by an impact on inflation due to the flood situation, as I explained earlier. In terms of working capital, even though the number of days has moved from 190 days for the quarter stand-alone. And if you took 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. And the team did a remarkable job of collecting INR 847 crores, thereby ensuring that one of the highest collections for -- in this quarter. However, 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 have -- take a decision to stop productions and supplies, which will have a reasonably a better cash flow. Having said that, we have taken at all levels in the GridCrest business. And 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 are pretty confident on this. Though our inventory levels in terms of the working capital has gone up by about INR 150 crores, I think that this is 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 up on the inventory there, we could able to successfully grow at 40% plus overall and EMS business alone at 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 project. I'm happy to say that, that business also helped us to come to some normalcy and about 30% to 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 2-wheeler customers, where on most of you are right the concern has come down significantly to below the 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, but balance sheet is going to be clean. So going forward, we'll continue to spend and ensure that the team is work, 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 2-wheeler electric vehicle manufacturers 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 companies 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 days 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 a 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 believes in us, and of course, to make them 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 prefer 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 are actively working with the Government of Karnataka on a research land, which is about 20 kilometers of our facilities in Mysuru 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 of 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 inroads into the North American market and our acquisition at this point in time 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 of value additions to India, not just from our subsidiaries, 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 '26 was INR 473 crores for OSAT and INR 324 crores for PCB. Our current goal is to CapEx of about INR 300 crores for OSAT and PCB. But as and when -- as I said earlier, with the subsidies coming up, we'll be funding more. And as and when we have more customers, we have to more. Cash is not a constraint here. We want to make sure that the modular investment to make sure that we have ex checks and balances on our CapEx spending and revenue. We also received, happy to say that we also received a government subsidy to the tune of INR 170 crores in OSAT business till July '26. 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. We 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 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 automotive 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, would 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 initiatives. Our first 3U 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 GSL vehicle. This is a meaningful milestone for us, not just launching on development satellite, but getting into establishing paints capability into the emerging satellite electronic domain and opens the door for broader participation in India's space technology system. Alongside this, the request of ISRO, our subsidiaries, Cryo Precision and Aerocaliph Technologies are entering into titanium gas-bottle manufacturing to support their pipe programs and DRDO has a similar requirement for gas bottles across several of their missile 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 byproduct 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 NPV and value-added product, a product-led solution rather than the service-led solution and 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 the confidence and our commitment to keep earning it back and consistent delivery 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 are joining today. I'll now hand it back to the question-and-answer session, and thank you very much, and over to you.

[Operator Instructions] First question is from the line of Renu Baid from IIFL Capital.

A 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 the EMS grew 48% during the quarter? So can you just clarify on that first element?

Yes, the overall growth...

Mix of the solar or metering business that we have.

See, the overall business growth is 40%. The metering is 28%. So the total growth is more than 48%.

Got it. And while operating performance has been pretty strong given the increase in inventories as well as working capital, our PBT margins have been much softer. So 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 is a significant drain out there? And third question aligned to this is, while smart metering, we have consciously scaled it down because of working capital issues and concerns. But it's been almost two years and the net profitability expectations returns from this business has been suboptimal. So 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. So what would be your thought process on this side to release both the working capital management bandwidth from the smart metering direct B2C portfolio that we have here?

I'll answer you one by one. I'll take the profit before tax or profit after tax for our comparison at this point of time. The other income that used to come to us earlier from our QIP fund, which is where the investment has come in has dropped about 2.5x 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, where the revenue needs to come. And look ahead in the next two quarters, I think this will start coming back when we are going to generate revenue from our semicon and circuits and of course, some of the programs that is running currently. For the second question, what you asked specifically on the metering business. As we said, we have entered 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 #1 installation done across the country than any other competition. But that's not our objective. We wanted to make sure that we reach always the best. You are right, we are evaluating the -- we are now strengthening and consolidating our operational performance in metering, which is core. Of course, we understand the challenges which is alongside of installing meter and getting it in over a long period of revenue. The management is seriously looking at the options and opportunities available like whatever the methodology we told, I don't want to commit at this point of time. But as we committed, in the February earnings call, you will hear more from us about our strategy to derisk the receivable portion of the metering business.

Sure. And lastly, what are the delivery time lines that you're looking in terms of final commissioning of the OSAT and PCB for the current financial year?

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, and we are committed to that. And the project is on track. I want to specifically put on record to thank my team in both who are working day and night to make sure this has happened. Our customers' validation is over in both -- in the semicon project, whereas OSAT project is starting now, but we are very, very confident that we'll be doing this.

Added to what Dr. Muthukumar told, our OSAT, all the trials and validation is getting over now. We will start the commercial buildings. And as far as PCB is concerned, our entire capacity has been requested by one large player, a global player. So 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.

[Operator Instructions] Next question is from the line of Siddharth Bera from Nomura.

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? And second is how much will be the smart meter revenues in the current quarter, which we have booked? Apart from that, sir, I mean, in terms of new order wins, if you can share some more color, we did get about INR 1,500 crores 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 year -- current quarter?

See, we normally don't share the revenue with segment-wise and vertical. But because metering business and the EMS business as most of you are asking specifically, we wanted to share this with you so to give a better clarity. Our overall revenue for this year -- this quarter is about INR 946 crores, on which our sales -- this is INR 946 crores is without GST. And our sales is about INR 90 crores -- INR 210 crores in metering business and the rest all is in the EMS business. That is a 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 -- the next question 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 2-wheeler EV manufacturers, we have been working with them for last one year, and our protos 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. But very, very happy to say that this quarter, we have come back very strongly and the customers prep 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 percentages in the stand-alone EMS business, which will include other than metering business, if you take it and of course, other than foreign entities also because our acquisition of the August Electronics was done only in July. So, last year, first quarter, it was not there. So as a stand-alone EMS business, if you see our growth is 53% from INR 418 crores of last year to this year of INR 639 crores, stand-alone EMS business. My overseas entities, if you take from INR 24 crores last year to INR 102 crores, this has grown at 327%. There is a new acquisition that has 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 minus 12% growth. That takes us to 40% overall. I hope I have answered your question.

Yes, sir. Thanks a lot for this. And would it be possible to share the cash flow from operations in the -- by the end of first quarter?

At the end of first quarter, I think we -- as we said, our inventory has gone up by INR 177 crores, we have added up. And we have -- on 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, 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 metering. And in terms of EMS business, the team has did an extremely good job. Inventory is a strategic decision. So we are -- we have improved on our commitments, whatever we have told, and we will ensure that going forward, our commitments of last quarter reversal is going to happen.

Got it, sir. And in OSAT and PCB put together, what has been the total investment till now? And for this year, how much investment are we 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, we were -- we did about...

Muthu, it's around INR 1,250 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 circuit, PCB.

And we have in transit around INR 250 crores of items which are yet to come.

[Operator Instructions] Next question is from the line of Santhosh Seshadri from Avendus Spark.

So my first question is on the smart metering business. So 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 ball game? And also 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? And also 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? Or 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 clues on how to do that. I'll tell you, the metering business we acquired about two years before. And prior to that, we were a supplier to that company as a PCB assembly. So this has given us gain 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 meters and second is the 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. And when we are talking about the revenue of EX, 60% of the revenue or 65% of the revenue comes from the EMS business. So we still consider this helping as our EMS business to grow when we are in the metering business. Having said this, 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 recently good for a company which is taken into this initiative one year before. If you look at Kaynes, a very distinct and advantage of the company, which has got manufacturing of meter, a capability to install meter and have a software integration facility, 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 gives us the listings advantage. Yes, but the business model is a little long because there is a part of CapEx model and OpEx model, which is impacting the receivables. So our strategy to do this is how do we consolidate revenue. We are still making the revenue of 60% to 60% on this because of our EMS business. So like what you said, we have plans of various business model of divesting this other portion of it service provided separately and making sure that the receivables from that is not impacting directly into our balance sheet. But having said that, it's not a simple thing that we need to do. We are working on this model. As we commit, we come back by our February month on our strategy to see how we are going to manage this business. But 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. You can also understand the management commitment to this by -- we could have grown by -- we have enough order book available in the metering business. We could have done more revenue, honestly speaking. But just to make sure there's the discipline of the balance sheet, we have controlled our revenue growth in this area, which is also giving us -- it's a very, very challenging time, but we want to be doing that and taking the discipline.

And on the part of question bad, you mentioned that how is the shift from service model to supply model? How is that tracking?

We have done -- I'll take it. We have done all the pre-requirement study, everything. We are working with some partnership with many people, but nothing concrete has yet happened. You will hear in the coming quarters, may not be in the next quarter, the next quarter. Third quarter, we will have some clear idea on it.

[Operator Instructions] Next question is from the line of Achal Lohade from Nuvama.

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 '26. So if you could give us a similar number, the receivable was INR 1,528 crores in fourth quarter. So if you could help us with the absolute figure. And did I hear it right? You said the OCF was negative INR 248 crores. Have I understood right for 1Q FY '27?

Yes, you're right, tough quarters.

Okay. And if you could help us with the absolute figures of inventory 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 noncurrent assets, and that has gone to INR 1,925 crores, okay? Though our receivables in EMS, we started with INR 606 crores and we 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 crores to INR 1,311 crores. I think that is what took us the decision to reduce the top line in the business.

Got it. 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 '27? And how do you see the scale up for OSAT and PCB for FY '27 and '28? Those are my two questions.

Sir, revenue growth, we have committed with 2x of the market growth. In the first quarter, the market has grown at 17%, and we have grew at more than 43% in our -- 48% in our EMS business. So we don't want to give an absolute number because there is so much of volatility in the market. The availability of material in this quarter and next quarter is going to have a huge impact into this business. So 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 a very committed people, we are quite confident of achieving the twice the market growth. So this is what the commitment that we can -- we are giving, and we are working towards this. As far as OSAT and PCB is concerned, we only told from third quarter revenue starts in both the business, and we have committed a full year revenue of total INR 500 crores between INR 450 crores to INR 500 crores, which is what we are targeting at this point in time, we are on the target.

Next question is from the line of Praveen Sahay from PL Capital.

My question is related to the components. As you also touched upon and given some detail in the presentation, the prices for our components has been red on the average of 30%, 35%, given the lead time has increased. So can you give us some color on overall your business, how much of this cost inflation has already been captured in Q1? And in the coming year, how much we will see the impact of that? And is there any margin compression we are expected to see out of this?

I'll set this 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 price is going up by 30%, 35% and PCB is the one which is challenging today because even order booking is gone with an advanced payment. That's a level that the 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 had been an impact of about more -- when compared to the last year to this year is about 3.3% of the import level, what we are doing on the EBITDA impact. But as I said, because of the strategic initiatives that has been taken to build up the inventory, the impact was very minimal. And we also have a very good system of a back-to-back working with customers in most of the expenses that is getting added up. However, the other cost escalation, as consumables 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 in case 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 quarters because there is a huge impact that is happening. One is the 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. So that's the update I wanted to give you. As he said, PCB business, PCB prices have gone up 3x. 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. But availability has become a big problem.

So ultimately, we will going to see our gross margin compression because of that because there is a Q-o-Q, I understand there is a pass-through mechanism, but there is a shortage of raw material as well. So do you expect in the coming 9 months, you will see the gross margin compression because of that?

This is a difficult year. This year is a difficult year, but I don't think for us, whatever we have planned, we will try and meet the requirement. But it is not going to be an easy year. It is going to be a tough year.