Kaynes Shares Plunge 30% as JPMorgan, Kotak Raise Accounting Concerns

Kaynes Technology: Market Value Collapse Amid Financial Scrutiny

India's Kaynes Technology India Ltd. has lost more than $1 billion in market value this month as analysts scrutinize its financial disclosures. Shares plummeted as much as 14% on Monday, extending December losses to over 30%. The selloff followed critical reports from JPMorgan and Kotak, which highlighted concerns around cash flow and accounting practices.

The electronics manufacturer's stock is now trading at a 50% discount from its 52-week high, hitting an eight-month low of ₹3,851.5 on Monday. The company's market capitalization has dropped to $2.8 billion, a sharp reversal from the optimism that surrounded its listing earlier this year. The stock remains under pressure as investors await clarification on its financial practices according to the analysis.

Kaynes has been accused of ambiguity in its accounting treatment of acquisitions, particularly in its treatment of intangible assets and related-party transactions. Kotak Institutional Equities noted a "variance in cash flow statements versus asset additions" and pointed to inconsistencies in the disclosures between standalone and consolidated reports. JPMorgan analysts added that revenue growth appears suspect, raising "question marks" over the company's financial integrity.

Why the Standoff Happened

Kotak Institutional Equities published a detailed critique of Kaynes' accounting practices, focusing on the company's acquisition of Iskraemeco and Sensonic. The report highlighted a failure to disclose certain related-party transactions and a lack of clarity in goodwill recognition. Specifically, a ₹180 crore purchase from Kaynes Electronics Manufacturing was not reflected in its own disclosures.

The company responded by clarifying that some intangible assets recognized during acquisitions had been netted off against goodwill. It also stated that related-party transactions were eliminated during consolidation and were not required in standalone disclosures. However, investors remained skeptical, noting that these explanations did little to address broader concerns over governance and transparency as analysts pointed out.

JPMorgan analysts echoed these concerns, warning that the company's balance sheet and cash flow statements lacked clarity. They pointed to growing debtors and a lack of improvement in working capital as red flags. "Investor feedback indicates Kaynes needs to show improvement in cash flows," wrote Bhavik Mehta, a JPMorgan analyst. "All eyes will be on third quarter earnings where we will ask questions on receivables, working capital, and provisions for doubtful debts." This analyst statement was cited.

Kaynes shares have now fallen 42% in 2025, a stark contrast to its strong start of the year when it touched a peak of ₹7,824.95 in January. The stock is currently in the Futures & Options (F&O) ban, meaning no new positions can be taken. This is a rare move and typically indicates heightened regulatory or market scrutiny.

The decline has been steeper than the broader market. While the BSE Sensex has risen 2.3% in the past month, Kaynes Technology has tumbled 31%. The stock has also fallen 41% from its three-month high of ₹7,705, which it reached on October 7 according to market reports.

Analysts have been divided in their response. ICICI Securities suggested some of the discrepancies could be clerical errors rather than material misstatements. However, JPMorgan and Investec remain cautious. JPMorgan retained its "Overweight" rating but advised investors to avoid "bottom-fishing" at current levels until Q3 results are released. Investec, meanwhile, cut its rating to "Sell," citing weak core business performance and deteriorating balance sheet trends.

What Analysts Are Watching

The next major test for Kaynes will come with its third quarter earnings report, which analysts are using to evaluate the company's financial health. JPMorgan is particularly focused on receivables and working capital, noting that debtors have nearly doubled from ₹570 crore to ₹1120 crore in the past six months. The brokerage also highlighted a ₹55 crore provision for doubtful debts, raising concerns about the company's ability to collect outstanding payments.

Kaynes has pointed to a strong orderbook of ₹80,994 m as of September 30, 2025, as a sign of future growth potential. The company is also pushing into high-growth segments like automotive and railways, which it sees as opportunities to diversify beyond its core smart meter business. Still, analysts caution that these long-term strategies may not offset near-term governance and liquidity concerns as noted in the analysis.

In its recent analyst call, the company reiterated that there were no inconsistencies in its financial accounting and that most of the issues raised by Kotak were not valid. It also confirmed that there were no plans for the promoter group, which holds a 53.46% stake, to reduce its ownership according to the company's statement.

Kaynes Technology's share price remains highly volatile, with a 21% drop in the past five trading sessions. The stock is now trading at a level not seen since February 2025. Given the current regulatory scrutiny and market sentiment, analysts are advising investors to approach the stock with caution until key financial and governance concerns are fully addressed.