Kaynes Technology Shares Drop Over 13% Amid Accounting Discrepancies and Working Capital Concerns
Shares of Kaynes Technology declined by over 13% intraday on Friday, December 5, amid rising concerns over its financial disclosures and working capital pressures. The stock closed 12.45% lower at ₹4,358.60, as brokerages flagged potential accounting inconsistencies and scrutinized inter-company transactions.
The company came under scrutiny after Kotak Institutional Equities highlighted significant discrepancies in the financial disclosures made by Kaynes Technology, its subsidiary Kaynes Electronics Manufacturing, and Iskraemeco for FY2025. Kotak flagged multiple mismatches across these entities, raising questions about the accuracy of the balance sheet and cash flow statements.
Major brokerages such as JPMorgan and Investec also adopted a cautious stance. JPMorgan advised investors to remain cautious and avoid “bottom fishing,” citing the absence of near-term catalysts until the release of the third-quarter results. While maintaining an ‘overweight’ rating with a target price of ₹7,550, JPMorgan emphasized that current market sentiment, rather than fundamentals, is driving the stock. The brokerage pointed out that Kaynes is experiencing balance sheet pressures, weak cash flows, and concerns over revenue growth, especially outside its smart meter segment. Investor feedback indicates the company needs to demonstrate improvement in cash flow before restoring confidence.
Kotak’s critique was more pointed. The brokerage noted that in FY25, Kaynes acquired Iskraemeco and a 54% stake in Sensonic for ₹88.3 crore, recognizing goodwill of ₹114 crore. However, the FY25 consolidated balance sheet did not reflect this increase in goodwill, instead showing a net negative adjustment of ₹1 crore and a ₹56.1 crore rise in general reserves. Management clarified that most of the acquisition consideration was linked to a contract awarded to Iskraemeco and was classified as an intangible asset, rather than goodwill. Nonetheless, Kotak highlighted that no additional intangible assets or fair value adjustments were recorded.
Further concerns were raised over missing cash flow details, as the ₹72.5 crore payment (net of contingent consideration) did not appear as a cash outflow in the statements. The brokerage also identified discrepancies in related-party disclosures. For instance, Iskraemeco’s filings showed purchases of ₹180 crore from Kaynes Electronics Manufacturing, but these transactions were absent from Kaynes’ disclosures. Additionally, Iskraemeco reported year-end payables of ₹320 crore to Kaynes Technology and ₹180 crore to Kaynes Electronics, alongside receivables of ₹190 crore from Kaynes Technology, balances that do not appear in the financial statements of the latter entities.
The development has raised investor caution surrounding Kaynes Technology, with analysts awaiting further clarity on its financial reporting and operational performance.
