The shares of a company that develops safety systems and software for Indian Railways have surged by up to 13,500% in the past five years. If you invested 1 lakh rupees in May 2020, it would have become 1.37 crore. We are talking about Kernex Microsystems. This 35-year-old company launched its IPO in 2005. The IPO size was 99.01 crore, and a minimum investment of INR 6,250 was required for bidding. The share price was set at INR 250 per share.

However, the company struggled in its initial years and continued to decline, reaching its lowest level of INR 11.50 per share in May 2020. Over the past four years, the company’s shares have reached their highest level of INR 1,580 per share. Currently, Kernex is trading around INR 890 per share.

Project Details & Scope

Kernex Microsystems is a leading railway safety solutions provider. The company has secured a contract from South Eastern Railway for the implementation of the Kavach train collision avoidance system (TCAS). The contract is valued at INR 325.33 crore. The project was awarded to the KERNEX-MRT consortium and involves the supply, installation, testing, and commissioning of Kavach across 688 RKM in the Kharagpur and Chakradharpur divisions.

The South Eastern Railway issued the Letter of Acceptance (LoA) to the KERNEX-MRT consortium for this high-profile project. The contract entails the deployment of the Kavach system on “GO & GO” routes, ensuring enhanced railway safety and operational efficiency. The project is expected to be completed within 1,000 days from the appointed date.

Kavach is an advanced train collision avoidance system developed to prevent train accidents caused by signal passing at danger, over-speeding, and head-on or rear-end collisions.

Market Sentiments

Following the announcement, the shares of Kernex Microsystems closed at INR 889.80 per share on NSE, which reflects a 5% increase from the previous day. This rally comes in a bearish market where the Sensex fell over 1,400 points and the Nifty dropped below 21,150 level. The rally indicates that investors are confident about the company’s role in the railway’s safety infrastructure projects.

Company’s Financial Performance

For the third quarter ending in December 2024, the company reported a net profit of INR 7.14 crore. The company’s total revenue surged by 342% year-on-year, reaching INR 36.81 crore in December 2024 from INR 8.31 crore a year earlier.

Despite this short-term growth, the stock has experienced volatility. Year-to-date, Kernex Microsystem’s share price has declined by 40% from its top. The company’s market capitalization currently stands at INR 1,428 crore.

Conclusion

This order received from South Eastern Railway is a major achievement for the company and a result of its growing expertise in railway safety. This stock has witnessed several ups and downs, but the increasing emphasis of Indian Railways on railway safety will further benefit the company in the long term. Even amid falling stock markets, a 5% rally is also an achievement for the company, reflecting the growing confidence of investors in it.

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