💻 At a Glance
Kellton Tech Solutions Ltd is a smallcap IT services firm that got slapped with a -₹176 Cr mystery loss in FY23 (remember that “other income” nuke?). But cut to FY25: margins are back, profit is ₹80 Cr+, stock is rising, and management just approved a ₹69 Cr preferential issue. With a P/E of 16, an ROCE of 17%, and a 1:5 stock split in the pipeline — is Kellton 2.0 the real digital transformation? Or just a bug fix before another crash?
1. 🎣 Introduction with Hook
Remember that one college friend who vanished for 3 years, then returned as a fitness influencer? Kellton Tech is that guy.
Back in FY23, investors had mentally written it off after a ₹176 Cr “Other Income” hit (still unexplained in human language). But now?
- Profit: Back to ₹80 Cr+
- OPM: Recovered to 12%
- ROE: 16.3%
- Promoters? Issuing warrants worth ₹69.3 Cr
- Bonus? Nope. Stock split incoming.
👉 Is this a real turnaround? Or is it just a PPT-level facelift?
2. 👨💻 Business Model: WTF Do They Even Do?
Kellton offers digital transformation + IT consulting across:
- Agile software development
- Digital commerce & marketing
- ERP implementation (SAP, Oracle)
- Integration (Mulesoft, API-first solutions)
- Cloud, Data & AI services
- Outsourced product development
- Testing, QA, and support
🧠 Clients span:
- BFSI
- Retail & eCommerce
- Energy
- Public Sector (incl. US Gov contracts)
They’re based in Hyderabad but generate >70% revenue from US & EU. Truly a “Dollar-Dollar Babu”.
3. 📈 Financials Overview – Profit, Margins, ROE, Growth
| Metric | FY21 | FY22 | FY23 | FY24 | FY25 |
|---|---|---|---|---|---|
| Sales (₹ Cr) | 776 | 843 | 917 | 983 | 1,098 |
| Net Profit (₹ Cr) | 71 | 70 | -127 ⚠️ | 64 | 80 |
| EBITDA Margin | 14% | 12% | 10% | 11% | 12% |
| ROE | 7.3% | 7.3% | -27% | 16% | 16.3% |
| ROCE | 18% | 17% | 14% | 16% | 17.4% |
✅ FY25 shows clean rebound from FY23 chaos
❌ But sales growth is painfully slow: 3Y CAGR ≈ 9%
4. 💸 Valuation – Is It Cheap, Meh, or Crack?
- CMP: ₹132
- P/E: 16.1
- P/B: 2.4
- Market Cap: ₹1,280 Cr
- EPS (FY25): ₹8.18
📉 Fair Value Range?
At 15–18x on ₹8–9 EPS = ₹120–₹162
🟢 Not wildly overvalued. But not screamingly cheap either. You’re paying for a re-rated tech turnaround — not an industry leader.
5. 🔥 What’s Cooking – News, Triggers, Drama
- 📣 Preferential Issue: 55 lakh warrants @ ₹126 = ₹69.3 Cr
- 🔪 Stock Split 1:5: To boost liquidity & retail participation
- 📈 Margins back to 12%, clean 4 profitable quarters
- 🏛️ FIIs creeping back: From 0.08% → 1.07% in 4 quarters
🚩 What’s missing? Still no dividend, no buyback, and vague clarity on that FY23 write-off.
6. 🧾 Balance Sheet – How Much Debt, How Many Dreams?
| Metric | FY23 | FY24 | FY25 |
|---|---|---|---|
| Net Worth (₹ Cr) | 373 | 395 | 487 |
| Borrowings (₹ Cr) | 162 | 156 | 163 |
| D/E Ratio | 0.43x | 0.40x | 0.33x |
| Total Assets (₹ Cr) | 596 | 660 | 789 |
🧠 Observation: Debt levels are under control. Reserves have grown nicely after the FY23 write-off. Asset light.
7. 💰 Cash Flow – Sab Number Game Hai
| Metric | FY23 | FY24 | FY25 |
|---|---|---|---|
| CFO (₹ Cr) | ₹24 | ₹56 | ₹6 |
| CFI (Capex) (₹ Cr) | -₹72 | -₹40 | -₹25 |
| FCF | -₹48 | ₹16 | -₹19 |
💡 Capex mostly in product/platform R&D + infra upgrades
⚠️ FY25 free cash flow slightly negative, but not alarming
8. 📉 Ratios – Sexy or Stressy?
| Metric | FY25 |
|---|---|
| OPM | 12% |
| ROE | 16.3% |
| ROCE | 17.4% |
| Cash Conversion | 108 days |
| Debtor Days | 108 |
📦 Slightly working capital heavy, but improving.
ROEs are at 3-year highs post that FY23 disaster.
9. 📊 P&L Breakdown – Show Me the Money
- FY25 revenue: ₹1,098 Cr
- EBITDA: ₹128 Cr
- Net Profit: ₹80 Cr
- EPS: ₹8.18
- Dividend: Still zero. Nada. Zilch.
🧊 Reason: Likely reinvesting in growth, but time to start rewarding shareholders now that profits are real again?
10. ⚔️ Peer Comparison – Who Else in the Game?
| Company | P/E | ROE | OPM | Mcap (₹ Cr) |
|---|---|---|---|---|
| Kellton Tech | 16.1 | 16% | 12% | ₹1,280 |
| Cyient | 26.5 | 17% | 15% | ₹14,000+ |
| Zensar Tech | 27.8 | 15% | 13% | ₹10,000+ |
| Xelpmoc | 80+ | NA | NA | ₹300 |
| KPIT Tech | 60+ | 24% | 20% | ₹32,000+ |
👉 For its size and risk, Kellton trades at a sane valuation — but needs double-digit growth to catch up with peers.
11. 🧑💼 Miscellaneous – Shareholding, Promoters
- Promoters: 40.82% (down from 52% in FY22)
- FIIs: 1.07% (up from 0.08%)
- DIIs: 0% 🙅♂️
- Public: 58.1% (includes 1.88 lakh shareholders)
📉 Big promoter dump in FY24.
📈 But preferential allotment shows they’re putting skin back in the game?
12. 🧠 EduInvesting Verdict™
Kellton Tech is the comeback kid of smallcap IT. You’ve got:
✅ 3 straight profitable quarters
✅ Margin & ROE recovery
✅ Fresh capital infusion
✅ FIIs peeking in again
But…
⚠️ FY23’s -₹176 Cr ghost still haunts (no clean explanation)
⚠️ No dividends in 10+ years
⚠️ 3-year sales CAGR = ~9% — too slow for “tech”
🎯 Fair Value Range: ₹120 – ₹162 (15–18x EPS of ₹8–9)
Verdict™:
Kellton Tech isn’t TCS. But it’s no longer trash-tier.
The preferential issue is bold. The stock split is flashy.
But unless growth accelerates, this comeback might stay mid-tier.
✍️ Written by Prashant | 📅 June 28, 2025
Tags: Kellton Tech, smallcap IT stock, preferential allotment, digital transformation, turnaround story, tech stock analysis, FY25 IT results, EduInvesting analysis
