shares fell again on Friday, extending yesterday’s decline triggered by Kotak Institutional Equities’ note flagging a series of accounting concerns in the company’s FY25 results. Investor sentiment remained cautious as the brokerages observation — continued to circulate in market discussions. In response, Kaynes released a detailed clarification addressing each point raised.
The stock slumped over 13 per cent in early trade to ₹4,312 before settling at ₹4,358.60 (12.45 per cent lower) on the BSE, against the previous close of ₹4,978.60.
The company explained that the treatment of goodwill and reserve adjustments stemmed from applicable accounting standards governing business combinations. It noted that previously unrecognised intangible assets can be recognised at acquisition, and that customer contracts related to the Iskraemeco acquisition were treated as intangible assets and amortised accordingly.
Kaynes added that these were evaluated annually and offset with goodwill in line with accounting requirements.
On the reported rise in contingent liabilities to ₹520 crore, the company said the bulk of the increase came from performance bank guarantees issued for Iskraemeco Projects and corporate guarantees extended to subsidiaries. These, it explained, were necessary to meet funding requirements following the acquisition.
Kotak had also highlighted that purchases worth ₹180 crore from Kaynes Electronics Manufacturing were not reflected in related-party disclosures. Kaynes acknowledged that while these transactions were eliminated at the consolidated level under Indian Accounting Standards, they were inadvertently omitted from the standalone financial statements. The company said the oversight has been rectified and flagged for future compliance.
A similar explanation was offered for year-end payables to Kaynes Technology and Kaynes Electronics Manufacturing, as well as receivables that also did not appear in the related-party disclosures. Kaynes reiterated that the issue lay only in the standalone filings, as the transactions were duly captured in the consolidated accounts.
The brokerage had pointed out that the average borrowing cost for FY25 appeared unusually high at 17.7 per cent. Kaynes responded that the computation should consider bill discounting, which effectively reduces interest costs by up to 10 per cent. The company noted that its FY24 average borrowing rate, calculated on a comparable basis, would have been 25.3 per cent higher than FY25.
On the question of ₹180 crore capitalised as technical know-how and prototypes, Kaynes said these assets were largely linked to customer-contract-related intangible assets arising from the Iskraemeco acquisition, in addition to internally developed R&D assets.
It stated that the recognition was aligned with accounting standards covering intangible assets.
Despite the clarifications, selling pressure persisted in the stock today as investors weighed the explanations against the concerns raised by analysts.
JP Morgan advises investors not to bottom fish
According to a JP Morgan (Asia Pacific Equity Research) note, Kaynes Technology has fallen about 25 per cent in the past month, significantly underperforming the Nifty. The decline is driven not by changes in fundamentals but by market concerns around cash flows, especially receivables, working capital, and provisions for doubtful debts, it said.
It stated it is not the right time to bottom-fish, as the stock continues on a downward trajectory and it is unclear where it will stabilise. However, JP Morgan maintained an overweight rating from a 12-month perspective, expecting clarity around Q3 earnings to be key.
The firm concluded that a cash-flow recovery is essential for a rally, and upcoming quarterly results — particularly management commentary on receivables, working capital, and provisions — will define the stock’s outlook.