Kaynes Technology’s significant growth projections for FY25 are facing scrutiny from multiple brokerages, including Kotak Institutional Equities, BNP Paribas, and Investec, which have raised concerns regarding the company’s accounting practices, capital allocation strategies, and increasing working capital issues.
In its recent analysis, Kotak Institutional Equities flagged several critical issues related to accounting transparency, capital allocation, and the company’s reliance on its recently acquired smart metering subsidiary, Iskraemeco. Key concerns identified in the report include a heavy dependence on Iskraemeco for revenue and profit, unclear adjustments related to goodwill and reserves, a 22-day increase in the cash conversion cycle, negative free cash flow driven by high capital expenditures, and inconsistencies in disclosures regarding related-party transactions.
Kaynes reported FY25 revenues of ₹2,720 crore, representing a year-on-year growth of 51%, largely attributed to the incorporation of Iskraemeco’s smart metering business acquired on September 30, 2024. The acquisition contributed ₹48.9 crore to the company’s total profit after tax (PAT), accounting for 44% of the consolidated profit. Notably, a significant portion of Iskraemeco’s revenue—₹620 crore and corresponding profits—accrued in the second half of the fiscal year following the acquisition.
However, Kotak highlighted anomalies in the reported data, including an implied net margin of 28% in the latter half of the year, a notable turnaround from a ₹48.3 crore loss in the first half, and an unrealistically brief payback period of under six months.
Further complicating matters, Kaynes acquired Iskraemeco along with a 54% stake in Sensonic for ₹88.3 crore, leading to an expected recognition of ₹114 crore in goodwill. Unexpectedly, the consolidated balance sheet showed no corresponding increase in goodwill; instead, there was a net negative adjustment of ₹1 crore and a ₹56.1 crore rise in general reserves. Management attributed this discrepancy to the recognition of a contract-related intangible asset but failed to disclose any additions or fair-value adjustments related to intangible assets.
Kotak also pointed out concerns in cash flow presentation, noting that ₹72.5 crore paid for acquisitions did not appear as a cash outflow due to consolidation eliminations, leading to questions about financial reporting.
The report also indicated a 22-day deterioration in the cash conversion cycle, compounded by extensive capital expenditures that resulted in negative free cash flow. Continuing capital needs alongside pending government grants were cited as additional stressors on the company’s finances.
BNP Paribas has reiterated a neutral rating on Kaynes, voicing ongoing concerns regarding balance-sheet pressures and working capital intensity. As a result, it has adjusted earnings estimates for FY27-28 downward due to rising financing costs, advocating that the stock will likely continue to trade at a discount relative to B2C peers due to funding gaps and execution risks.
Investec maintained a sell rating on Kaynes, with a target price set at ₹5,760, warning that FY25 and H1 FY26 results show a growing reliance on Iskraemeco’s acquisition, while the core EMS business shows stagnation. The brokerage noted a marked decline in working capital metrics—such as a significant increase in debtors and inventories, rising provisions, and a doubling of receivable amounts from Iskraemeco—paired with weak cash conversion performance.
Finally, Kotak highlighted discrepancies in related-party transaction disclosures, emphasizing governance concerns stemming from rapid expansion and acquisitions. Investec also pointed to slow advancements in OSAT and PCB investments, noting minimal capital deployment and outstanding subsidy receipts.
The stock closed 6.17% lower on the BSE at ₹4,978.60 on Thursday.
Published on December 4, 2025.
