Kaynes Technology India Ltd fell nearly 6% on Thursday after Kotak Institutional Equities raised multiple red flags in its latest annual report analysis, highlighting corporate governance concerns, inconsistent disclosures, rising liabilities, and pressure on margins.
Kotak pointed to inconsistencies in related-party disclosures, noting that inter-company transactions and year-end balances reported by subsidiary Iskraemeco do not match those reported by Kaynes Technology and Kaynes Electronics Manufacturing.
Major red flags highlighted
• Inconsistent related-party disclosures
Iskraemeco has reported significant transactions with group entities that are not reflected in the disclosures of Kaynes Technology or Kaynes Electronics Manufacturing.
• Overdue receivables from parent
Iskraemeco has Rs 45.8 crore in receivables outstanding for more than a year from the parent company, as flagged by CNBC Awaaz.
• Contingent liabilities jump
Contingent liabilities have risen to Rs 520 crore, now equivalent to 18% of net worth, as per reports.
• Profitability risk from receivable discounting, provisions
Receivable discounting and provisioning requirements could put pressure on profitability and margins, according to reports.
• High borrowing cost
Kaynes’ average cost of borrowings in FY2025 stood at a steep 17.7%, adding to concerns on interest burden and cash flow strain.
• Heavy capitalization of technical know-how
The company capitalised Rs 1.8 billion (6.5% of FY2025 revenue) toward technical know-how, including designs and prototypes.
• Deterioration in cash conversion cycle
Kaynes Electronics Manufacturing’s cash conversion cycle increased by 119 days YoY in FY2025, indicating stretched working capital.
Stock reaction
Shares of Kaynes remained under pressure through the session as investors reacted to Kotak’s governance-related observations and concerns surrounding financial transparency.
