Kaynes Technology shares fell another 8% on Wednesday, December 10, to trade at ₹3,980.40, extending a period of significant volatility for the electronics manufacturer. The latest decline follows a sharp cut in the price target by Kotak Institutional Equities, which cited ongoing concerns about the company's financial disclosures and accounting practices. The stock has seen a substantial correction, falling 46% this year and 36% over the last year.
Accounting Concerns Drive Sell-Off[businesstoday+1]
The recent pressure on Kaynes Technology's stock began after Kotak Institutional Equities released a report questioning the company's fiscal year 2025 disclosures. Kotak highlighted several issues, including inconsistencies in related-party transactions and negative operating cash flows despite revenue growth. The brokerage noted an operating cash outflow of ₹0.8 billion in FY2025, followed by a larger outflow of ₹2.2 billion in the first half of FY2026.
Kotak also raised concerns about the accounting treatment of technical know-how, where Kaynes capitalized ₹180 crore, approximately 6.5% of its revenue, as intangible assets. Additionally, the report questioned the accounting for Kaynes' acquisition of smart metering company Iskraemeco. These concerns, along with a sharp rise in contingent liabilities and elevated working capital, pushed net working-capital days to 171 from 110 in FY2024.[swastika+2]
Company Responds to Allegations[swastika+4]
Kaynes Technology has provided clarifications regarding the issues raised by Kotak. The company stated that some points were "disclosure-related discrepancies" or "misinterpretation" stemming from limited clarity in certain disclosures. Management acknowledged some reporting issues during an analyst call but denied any wrongdoing.
Regarding the Iskraemeco acquisition, Kaynes management asserted that the accounting treatment was correct, adhering to IND-AS accounting standards. The company also clarified that its effective borrowing cost for FY25 was around 10% after including bill discounting, countering Kotak's higher calculation of 17.7%. Kaynes further refuted a media report suggesting it was considering changing its statutory auditor.[business-standard+1]
Analysts Divided on Future Outlook[business-standard+2]
The market has seen a split among analysts following the developments. Kotak Institutional Equities maintained its "reduce" rating and further lowered its price target for Kaynes Technology to ₹4,150 from ₹6,180. Global brokerage Nomura also cut its price target to ₹5,455 from ₹8,478, though it maintained a "buy" rating on the stock. Nomura indicated that cash flow improvement remains a key factor.
In contrast, JPMorgan reiterated an "overweight" rating on Kaynes Technology, setting a target price of ₹7,550. JPMorgan believes the stock is now the "cheapest" under its coverage, despite acknowledging stretched working capital and receivables. The brokerage sees nearly 91% potential upside, arguing that the recent derating is tied to short-term liquidity strain rather than a weakening of fundamentals. Macquarie also maintained an "outperform" rating with a target price of ₹7,700, implying a potential upside of approximately 100%. Macquarie noted that while management's clarification sounded reasonable, visible improvements in internal systems are needed to fully restore confidence.[businesstoday+7]
Kaynes Technology's Business and Growth Plans[livemint+2]
Kaynes Technology, a Mysore-based company, is a leading integrated electronics manufacturing services (EMS) provider. It offers end-to-end and IoT-enabled solutions, covering conceptual design, process engineering, and integrated manufacturing. The company serves diverse sectors such as automotive, industrial, aerospace, defense, and medical. Kaynes has also expanded into semiconductor assembly and testing (OSAT) and high-density interconnect PCBs (HDI PCBs).
Despite the recentstock turbulence, Kaynes Technology reported strong financial results for the second quarter of fiscal year 2026. Consolidated revenue grew 58.4% year-over-year to ₹9,062.18 million, and net profit increased by 101.7% year-over-year to ₹1,214.13 million. The company's management expects margins to expand in FY26 from 15.1% to at least 15.6%, supported by a robust order book of around ₹6,500-6,600 crore.[businesstoday+2]
Kaynes has ambitious growth plans, aiming for $2 billion in revenue by FY30, with significant contributions expected from its OSAT and PCB businesses. The company has allocated a capital expenditure of ₹3,400 crore for its OSAT business, with 70% funded by government subsidies. Kaynes Semicon, a subsidiary, recently achieved a milestone by manufacturing India's first commercially produced IPM Multi-Chip Module.[tijorifinance+1]
Investors are closely watching Kaynes Technology's future disclosures and efforts to address governance concerns. The company's ability to improve cash flow, manage working capital, and successfully execute its expansion plans will be crucial in restoring full investor confidence and stabilizing its stock price.[tradebrains+2]
