Kaynes Tech Issues Statement After Kotak Flags Accounting, Cash Flow Concerns — Details Inside

Kaynes Technology issued a detailed clarification to the stock exchanges after Kotak Institutional Equities raised concerns about its FY25 disclosures. The market reacted ahead of the exchange filing, with the company’s shares falling 4.56% on Thursday to Rs 5,065. The stock has dropped more than 7% in five days and about 22.7% over the past month.

The report from Kotak questioned Kaynes’s financial reporting, the accounting treatment of its smart metering acquisition and the impact of its expansion strategy, prompting the company to respond to each point.

Kotak’s note highlighted the influence of the Iskraemeco smart metering business, which drove 44% of Kaynes’s profit growth for FY25. The brokerage pointed to the subsidiary’s 28% reported net margin in the second half of the year and an implied payback period of six months. It also criticised what it described as ambiguous accounting around the acquisition of Iskraemeco and Sensonic, which Kaynes bought for Rs 8.3 crore but later reflected through goodwill and other adjustments in the consolidated balance sheet.

Kotak also raised concerns about Kaynes’s financial position. It noted negative cash flow for the year, driven by a 22-day increase in the cash conversion cycle and higher capital spending. It said Kaynes capitalised Rs 180 crore, or 6.5% of revenue, as technical know-how without giving further detail. The brokerage flagged inconsistencies in cash flow reporting and gaps in related-party disclosures involving the parent company and its subsidiaries. It also noted that government grants linked to the company’s semiconductor and PCB expansion remained pending. The brokerage maintained a reduce rating on the stock.

Kaynes said contingent liabilities rose to Rs 520 crore. It said additions included performance bank guarantees of Rs 96.8 crore for Iskraemeco projects and corporate guarantees of Rs 132.5 crore issued to subsidiaries in line with post-acquisition funding needs.

Addressing reporting gaps, the company said purchases worth Rs 1.8 billion from Kaynes Electronics Manufacturing in FY25 and year-end payables and receivables between group entities were removed during consolidation as required by accounting standards. It said these were left out of standalone disclosures by oversight and have been corrected.

The company said interest cost calculations must include bill discounting. It said the effective borrowing cost for FY25 stood at about 10%. Using the same method, Kaynes said the FY24 cost would be 25.3%, rather than 17.7%.

Kaynes said the Rs Rs 1,800 crore capitalised as technical know-how included Rs 115 crore of intangible assets from customer contracts, Rs 26 crore of development spending related to the Iskraemeco acquisition and Rs 39 crore from in-house research work.