Kaynes Technology is in the news again.
Its share price has fallen more than 35% in just one month, and investors are confused about what is happening. In the last few weeks, two major controversies have hit the company. First, it was with Motilal Oswal, and now a new issue has come from Kotak Institutional Equities.
On 5 December, the stock fell 12% in a single day.
But why is this happening?
Let’s understand everything in a simple way.
🔍 What Started the New Controversy?
On 3 December, Kotak Institutional Equities released a report for their big institutional clients. The report is not public, but Kaynes Technology responded to it. Their reply revealed what Kotak had questioned.
Kotak said that:
- Kaynes has used accounting rules in a way that makes profit look higher
- Some liabilities were not clearly shown
- Some related-party transactions were not disclosed
- Borrowing costs looked very high
This created panic in the market.
🧾 1. Profit Smoothing Using Intangible Assets
In September 2024, Kaynes bought a company called Skryme Eco India Pvt Ltd for ₹43 crore.
According to accounting rules, the purchase price should be divided into:
- Tangible assets (machines, plant, etc.)
- Intangible assets (contracts, IP, brand value, etc.)
Kotak’s claim:
Kaynes put a very large amount under intangible assets.
Here are the numbers Kotak listed:
- ₹115 crore – customer contract intangibles
- ₹26 crore – development cost
- ₹39 crore – R&D cost
Total: ₹180 crore
Why is this a problem?
Because intangible assets are not shown as expenses immediately. They are spread across years. This makes the current profit look higher.
This is called profit smoothing.
Kaynes responded saying they followed accounting rules (Ind-AS 103).
2. Contingent Liabilities of ₹520 Crore
Kotak found that Kaynes’ contingent liabilities suddenly increased to ₹520 crore, which is almost 18% of its net worth.
These include:
- Bank guarantees
- Corporate guarantees
These look harmless at first. But if a subsidiary fails to pay, Kaynes will have to pay.
Kaynes said this is normal business practice and nothing unusual.
3. Missing Related Party Transactions
This part worried many investors.
Kotak said that Kaynes:
- Bought goods worth ₹180 crore from its group company
- But did not show this in the standalone financial statements
Kaynes replied:
“We forgot.”
For a listed company, forgetting such big numbers is not a small thing.
4. Missing Inter-Company Receivables
Kotak also found that:
- One group company owes Kaynes ₹320 crore
- Another owes ₹10 crore
- Other group receivables total around ₹180 crore
But none of this was disclosed properly.
Again, Keynes said:
“We forgot to add it.”
Multiple “we forgot” replies made investors more doubtful.
5. Very High Borrowing Cost – Almost 18
Kotak noted that Keynes seems to pay around 17.7% interest, which is extremely high.
Kaynes said that if bill-discounting is adjusted, their real rate is around 10%.
How the Market Reacted
Even after Keynes gave its explanation, the stock kept falling.
On the day of the clarification, the stock fell another 12%.
Some numbers:
- Earlier P/E Ratio: 90–100
- After fall: around 77
- Market Cap: still above ₹300 crore
Many analysts believe the stock is still expensive considering the risks.
Where Are the Auditors?
When a company forgets:
- A ₹180 crore transaction
- ₹320 crore receivable
- Major disclosures
…it raises serious questions.
Auditors are supposed to catch these things.
If they didn’t, it means either:
- They missed it, or
- They ignored it
Both are worrying.
Should You Be Worried as an Investor?
Yes — at least be cautious.
Kaynes Technology is a well-known name because of its semiconductor plans. Many people invested due to future growth hopes.
But governance and transparency matter more than hype.
When a company repeatedly says:
“We forgot,”
…it becomes a red flag.
Final Summary
Kaynes Technology is facing serious questions about:
- Accounting practices
- Missing disclosures
- High liabilities
- Weak governance
Kotak raised valid concerns, and the market reacted strongly.
Until the company gives clear, detailed explanations, investors should stay careful.