Railway stock falls 16% after its request to extend KAVACH order deadline gets rejected

Synopsis: Kernex Microsystems (India) plunged sharply in today’s trade after CLW rejected the company’s request to extend the delivery deadline for its 2024 order of On-Board KAVACH equipment for 2,500 locomotives, mainly caused by a delay in certification.

The shares of this company, engaged in the manufacturing and selling of Safety Systems and Software services for Railways, such as KAVACH, are in focus after it took a significant blow today, which we will be discussing in this article.

With a market capitalisation of Rs 1,809 crore, the shares of Kernex Microsystems (India) Ltd reached a day’s low of Rs 1,011 per share, down 16 percent from its previous day’s closing price of Rs 1,204.80 per share. Over the past five years, the stock has delivered a multibagger return of 3,652 percent, outperforming NIFTY 50’s return of 77 percent.

Reason behind the slump

Kernex Microsystems (India) Ltd informed the exchanges that Chittaranjan Locomotive Works (CLW), which is one of the largest clients of the company, rejected its request to extend the delivery deadline for a 2024 order involving On-Board KAVACH equipment for 2,500 locomotives, which involved the supply, installation, testing, and commissioning. The primary issue was delays in the certification process, which lasted longer than Kernex had anticipated.

Kernex acknowledged that it was unable to complete the project on time due to these delays. The company requested additional time from CLW, but CLW responded on January 9, 2026, declining the extension.

Nevertheless, Kernex emphasised that this setback will not impact its financial position, technical qualifications, or eligibility for any ongoing or future Indian Railways tenders.

The company also noted that Indian Railways has already issued new locomotive tenders through both CLW and Banaras Locomotive Works (BLW). The bidding process has concluded, and they are now awaiting the results. It also stated that it intends to utilise the inventory from the previous project for these new CLW/BLW orders, as well as for other ongoing projects and future opportunities.

How is this significant for the company?

This news is a bit of a blow for Kernex. They missed the deadline for the CLW KAVACH order, and their request for an extension was denied. In fact, CLW was one of the largest clients of the company, with Rs 1,730 crore of its orders coming from it, which is a staggering 81 percent of the total order book exposure. That’s likely to raise questions about their project management and certification processes. 

However, the financial impact appears to be quite limited. The company quoted that this won’t affect their financials or exclude them from future tenders. Additionally, they can redeploy the inventory they’ve already produced for other CLW or BLW orders, or even for different railway projects in the future. 

So, while this might upset investors in the short term, what really counts is how Kernex manages things going forward. If they secure new tenders and deliver on schedule, this setback probably won’t linger for long.

The revenue from operations for Kernex Microsystems stands at Rs 47.12 crores in Q2 FY26 compared to Q2 FY25 revenue of Rs 41.22 crores, up by 14 per cent YoY. However, on a QoQ basis, it reported a decline of 16 percent from Rs 55.93 crore. 

Coming down to its profitability, the company’s net profit stood at Rs 6.52 crore in Q2 FY26, down from Rs 6.82 crore in Q2 FY25, which is a decline of 4 percent YoY. Additionally, on a QoQ basis, it reported a net profit of Rs 7.41 crore, which is a decline of 12 percent.

As per the latest filing, Kernex has a total order book of Rs 2,124.16 Cr, led by CLW orders worth Rs 1,730 crore and SER orders of Rs 179.21 crore. Of the total, KMIL-exclusive orders stand at Rs 1,735.38 crore, while Rs 388.78 crore, are being executed with partners/consortiums (JVs).

Kernex Microsystems (India) Ltd, specialises in developing electronic and software systems, primarily for railways and safety applications. Initially, Kernex began as a 100% export unit under the Software Technology Parks of India, focusing solely on software exports. However, around 1999, they shifted their focus to railway safety systems. 

Since then, Kernex has worked on projects such as building data acquisition systems for Konkan Railway. The company has played a significant role in creating anti-collision and other safety solutions for Indian Railways, managing all aspects from design and manufacturing to installation and ongoing support.

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