Kernex Microsystems (India) Ltd shares experienced a sharp decline of 16% in today's trading session, falling to ₹1,011 per share from the previous day's closing price of ₹1,204.80. The railway safety systems manufacturer faced significant market pressure after Chittaranjan Locomotive Works (CLW) rejected its request to extend the delivery deadline for a major KAVACH equipment order.

Order Rejection Details

The company informed exchanges that CLW declined its request to extend the delivery deadline for a 2024 order involving On-Board KAVACH equipment for 2,500 locomotives. The order encompasses supply, installation, testing, and commissioning of the safety equipment. CLW communicated its rejection decision on January 9, 2026.

The primary reason for the extension request was delays in the certification process, which took longer than Kernex had originally anticipated. The company acknowledged its inability to complete the project within the stipulated timeframe due to these unforeseen certification delays.

Financial Impact and Order Book Exposure

The rejection carries significant implications given CLW's substantial contribution to Kernex's business portfolio. CLW orders represent ₹1,730 crores of the company's total order book, accounting for approximately 81% of total exposure.

Despite the setback, Kernex emphasized that this development will not impact its financial position, technical qualifications, or eligibility for ongoing or future Indian Railways tenders.

Recent Financial Performance

The company's Q2 FY26 financial results show mixed performance across different metrics.

The company demonstrated year-on-year revenue growth of 14%, though it experienced quarter-on-quarter declines in both revenue and profitability metrics.

Future Prospects and Inventory Utilization

Kernex indicated that Indian Railways has issued new locomotive tenders through both CLW and Banaras Locomotive Works (BLW), with the bidding process already concluded. The company is currently awaiting results from these tender processes.

The company plans to utilize inventory from the previous project for new CLW/BLW orders and other ongoing projects. This inventory redeployment strategy aims to minimize financial impact from the rejected order extension.

Stock Performance Context

With a market capitalization of ₹1,809 crores, Kernex Microsystems has delivered exceptional long-term returns despite today's decline. Over the past five years, the stock has generated multibagger returns of 3,652%, significantly outperforming the NIFTY 50's return of 77% during the same period.

The company specializes in developing electronic and software systems primarily for railways and safety applications. Originally established as a 100% export unit under Software Technology Parks of India, Kernex shifted its focus to railway safety systems around 1999 and has since become a key player in anti-collision and safety solutions for Indian Railways.

Source: https://tradebrains.in/railway-stock-falls-16-after-its-request-to-extend-kavach-order-deadline-gets-rejected/

Kernex Microsystems (India) Limited, a provider of safety systems and software services for railways, has announced its financial results for the second quarter, revealing a mixed performance with revenue growth and a slight decline in profits.

Revenue Growth and Profit Performance

For the quarter ended September 30, Kernex Microsystems reported:

The company experienced a significant 14.32% year-over-year increase in revenue, rising from ₹412.00 crore to ₹471.00 crore. Despite this growth, net profit saw a marginal decline of 2.94%, decreasing from ₹68.00 crore to ₹66.00 crore.

Improved Operational Efficiency

Kernex Microsystems demonstrated improved operational efficiency, with EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) growing by 37.86% to ₹142.00 crore, up from ₹103.00 crore in the same quarter last year. The EBITDA margin expanded significantly by 515 basis points, reaching 30.15% compared to 25.00% in the previous year.

Financial Position and Liquidity

As of September 30, Kernex Microsystems reported:

• Cash and cash equivalents of ₹810.97 lakh, down from ₹1,502.12 lakh at the end of the previous fiscal year.
• Total assets of ₹4,614.34 crore, a substantial increase from ₹2,364.51 crore reported on March 31.
• Total equity (attributable to equity holders of the holding company) of ₹1,737.38 crore, up from ₹1,579.10 crore at the end of the last fiscal year.

Operational Highlights

The company's Board of Directors, in a meeting held on November 13, approved the unaudited standalone and consolidated financial results for the quarter and half-year ended September 30. The meeting also included a review of the Limited Review Report on these financial results.

Auditor's Review

The company's statutory auditors, NSVR & Associates LLP, conducted a review of the financial statements. They highlighted certain matters, including:

1. The need for impairment assessment of the company's investment in its wholly-owned subsidiary, Avant-Garde Infosystems Inc.
2. Recoverability concerns for long-outstanding trade receivables and bank guarantees under arbitration.
3. Provisions made for diminution in the value of investment and advances to Kernex TCAS JV.

These points suggest that while Kernex Microsystems is showing operational improvements, there are areas that require careful management attention, particularly regarding investments and receivables.

Investors and stakeholders may want to monitor how the company addresses these concerns in the coming quarters, as they could impact future financial performance and stability.