Shares of Kaynes Technology India Ltd have plunged close to 17% over the past two trading sessions, triggering concern among investors as the stock continues to face intense selling pressure. The sudden and steep correction comes after Kotak Institutional Equities flagged multiple inconsistencies in the company’s related-party disclosures, raising serious questions around transparency and accounting accuracy within the Kaynes group.
What triggered the massive selloff?
Kotak’s detailed analysis uncovered several discrepancies between the financial disclosures made by Kaynes Technology, its subsidiary Kaynes Electronics Manufacturing, and its acquired entity Iskraemeco for FY2025. These mismatches suggest gaps in inter-company reconciliation and financial reporting.
Key issues highlighted by Kotak Institutional Equities
1. Unmatched related-party purchases
Iskraemeco reported ₹1.8 billion in purchases from Kaynes Electronics Manufacturing.
However, this crucial transaction does not appear in Kaynes Electronics Manufacturing’s own related-party filings.
2. Year-end balances not mirrored
Iskraemeco disclosed:
- Payables: ₹3.2 billion to Kaynes Technology and ₹1.8 billion to Kaynes Electronics Manufacturing
- Receivables: ₹1.9 billion from Kaynes Technology
None of these balances are reflected in the disclosures of the two Kaynes entities, despite the amounts being material.
3. Large overdue receivables
Iskraemeco’s filings show almost all of its current receivables are from its parent.
Worryingly, ₹458 million have remained outstanding for over a year, raising questions about collection timelines and financial clarity.
Why this matters
Such inconsistencies can indicate:
- Weak accounting controls
- Poor inter-company reconciliation
- Lack of transparency in financial reporting
- Potential risks in cash flow visibility
For a rapidly growing electronics manufacturing company, these red flags can significantly impact investor confidence — as reflected in the steep two-day correction.
Kaynes Technology issues clarification
In response to Kotak’s observations, Kaynes released a detailed clarification addressing six major concerns raised in the report.
Goodwill & Intangibles (Ind AS 103)
Kaynes explained that during acquisitions, intangible assets not recognised earlier can be capitalised. For Iskraemeco, a significant portion of the acquisition value pertained to customer contracts, which were recognised as intangibles and amortised over the contract period. These were offset against goodwill and undergo annual review.
Rise in contingent liabilities (₹520 crore)
The increase — around 18% of net worth — was attributed to:
- ₹96.8 crore of performance bank guarantees for Iskraemeco projects
- ₹132.5 crore of corporate guarantees for subsidiaries
According to the company, these were necessary due to additional funding requirements after the acquisition.
Kaynes reiterated that all disclosures are in accordance with Indian Accounting Standards and that corrective measures have been taken wherever gaps were identified.
Market reaction
Despite the clarification, the market remains cautious. Investors often treat discrepancies in related-party disclosures as serious governance concerns, leading to:
- Profit-booking
- Risk-off sentiment
- Increased short-term volatility
With the stock now down nearly 17% in 48 hours, sentiment remains fragile until the company provides full reconciliation clarity and sustained transparency in future filings.
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