Kaynes Tech Shares PLUNGE 39%: Why Analysts Are Warning Investors Not to Buy the Dip
Kaynes Technology share price crashed to an eight month low on Friday December 5 hitting Rs 4560 on the BSE amid heavy trading volumes. The stock has plunged 39 percent from its three month high of Rs 7705 reached on October 7 2025.
This sharp fall has raised serious red flags for investors as top brokerages like JPMorgan and Kotak Institutional Equities are now warning against bottom fishing.
The electronics manufacturing services company is facing mounting concerns over governance issues accounting disclosures and deteriorating cash flows.
Despite strong revenue growth of 58 percent year on year in Q2 FY26 the market sentiment has turned overwhelmingly bearish with 70 percent negative chatter on social media platforms.
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The massive selloff in Kaynes Technology shares is not a one day event but a result of multiple issues building up over the past few months. The primary trigger came from a detailed report by Kotak Institutional Equities on December 3 which highlighted several red flags in the company’s financial statements.
The brokerage pointed out inconsistencies between standalone and subsidiary disclosures particularly involving transactions worth Rs 180 crore between Iskraemeco and Kaynes Electronics Manufacturing that were not reflected properly in parent company books.
The governance concerns intensified when Kotak noted that Iskraemeco’s related party disclosures showed year end payables of Rs 320 crore to Kaynes Technology which were not matching up in the parent company’s records.
Additionally there were questions about how the company recorded goodwill and intangible assets after acquiring Iskraemeco and Sensonic for Rs 88.3 crore in FY25. While management issued clarifications stating that consolidated financials are accurate and standalone errors would be rectified investor confidence took a major hit.
Another major factor weighing on the stock is the lock in expiry that happened in late October. Around 11.6 million shares were released into the market flooding supply and initiating a downtrend from the Rs 7800 levels.
This created enormous selling pressure as early investors rushed to book profits. The stock lost over 31 percent in just one month compared to a 2.3 percent gain in BSE Sensex during the same period.
JPMorgan’s December 5 note specifically cautioned investors against bottom fishing despite maintaining an overweight rating with a target price of Rs 6500. The brokerage emphasized that unresolved issues surrounding balance sheet and cash flow along with questionable accounting practices make it risky to enter at current levels. They highlighted that the company lacks clear strong catalysts until Q3 earnings are announced expected in January 2026.
Investec took an even more bearish stance maintaining a sell rating with a target price of Rs 5760. The brokerage pointed out three major concerns in their analysis. First the core electronics manufacturing services business is showing weak performance with most growth coming from the recently acquired Iskraemeco smart meter division.
Second working capital troubles are mounting with debtors rising from Rs 570 crore at end of FY25 to Rs 1120 crore by end of H1 FY26 despite quarterly revenue remaining flat. Third the company created a provision for doubtful debt of Rs 55 crore representing 10 percent of outstanding debtors.
The valuation concern is also significant. Kaynes Technology is currently trading at a PE ratio of 105.6x which is significantly higher than the electronics manufacturing services sector average. At a time when the company is facing cash flow issues elevated working capital days and governance questions this premium valuation appears unjustified to most analysts. Investec values the core business at 55x FY27 PE which they consider rich given the circumstances.
One of the biggest red flags for Kaynes Technology is the deteriorating cash flow situation and ballooning working capital requirements. The company’s working capital days have crossed 180 which means it takes more than six months to convert sales into cash. This is a major concern for any manufacturing business as it ties up significant capital and reduces financial flexibility.
The debtors issue is particularly worrying. In just six months from end of FY25 to H1 FY26 the outstanding receivables nearly doubled from Rs 570 crore to Rs 1120 crore. What makes this even more concerning is that this happened while quarterly revenue remained relatively stable between Q4 FY25 and Q2 FY26. The company was forced to create a Rs 55 crore provision for doubtful debts suggesting that some of these receivables may not be recoverable.
Adding to the complexity Iskraemeco has deferred receivables of Rs 230 crore currently down from over Rs 300 crore originally. The company is looking to discount these receivables with more than Rs 100 crore already discounted by end of FY25. While management has committed to resolving aged receivables by end of FY26 and turning cash flows positive the market remains skeptical given the track record so far.
| Financial Metric | Q2 FY26 | YoY Growth | Concern Level |
|---|---|---|---|
| Revenue | Rs 906.22 crore | +58% | Moderate |
| Net Profit | Rs 121.41 crore | +102% | Low |
| Order Book | Rs 8099 crore | +49% | Low |
| Working Capital Days | 180+ days | High | Very High |
| Debtors | Rs 1120 crore | +96% | Very High |
The governance issues at Kaynes Technology center around discrepancies in how related party transactions and acquisitions were recorded across different entities. When Kaynes acquired Iskraemeco and a 54 percent stake in Sensonic for Rs 88.3 crore in FY25 the company recognized goodwill of Rs 114 crore. However the consolidated balance sheet for FY25 shows a net negative adjustment of Rs 1 crore in goodwill instead of the expected increase.
Management clarified that since a major part of the consideration was for a contract that Iskraemeco had entered into it was recognized as an intangible asset rather than goodwill. But Kotak pointed out that no additions in intangible assets related to contract or customer relationships were recorded in the books.
Furthermore the payment of Rs 72.5 crore for these acquisitions was not shown as cash outflow in the consolidated cash flow statement. Management explained that investments in subsidiaries are eliminated during consolidation so these payments were not shown separately.
The more troubling issue involves inter company transactions. Iskraemeco’s books show purchases of Rs 180 crore from Kaynes Electronics Manufacturing in FY25 but these transactions are not reflected in Kaynes Electronics Manufacturing’s related party disclosures.
Similarly Iskraemeco shows year end payables of Rs 320 crore to Kaynes Technology and Rs 180 crore to Kaynes Electronics Manufacturing plus receivables of Rs 190 crore from Kaynes Technology. None of these are properly reflected in the parent company’s disclosures.
ICICI Securities has taken a more lenient view suggesting these could be clerical errors in disclosure rather than actual accounting fraud. They believe the management has followed corporate governance norms and there is no wrongdoing. However until these discrepancies are fully resolved and audited the cloud of uncertainty will continue to hang over the stock.
The immediate focus for Kaynes Technology investors should be on the Q3 FY26 results expected in January 2026. This will be crucial to see if the company can maintain its revenue growth momentum and more importantly show improvement in cash flow generation. Management has committed to turning cash flows positive by end of FY26 so the next two quarters will be critical in determining if they can deliver on this promise.
Investors should also monitor any further clarifications or audit reports on the accounting discrepancies raised by Kotak. If the company can satisfactorily explain all the mismatches and get clean bills from auditors it could help restore confidence. On the other hand any additional red flags or regulatory scrutiny could push the stock lower.
The technical charts are also worth watching. The stock is currently in oversold territory with RSI at 31.58 but momentum remains weak. Key support levels are at Rs 4200 to Rs 4000 while resistance stands at Rs 4900 to Rs 5000. A break below Rs 4200 could trigger further selling while a strong close above Rs 5000 with volume could signal a potential reversal.
From a valuation perspective with consensus target at Rs 5440 there is still 18 percent upside from current levels. However given the multiple concerns this upside may not materialize unless the company can demonstrate concrete improvements in cash flows and resolve all governance questions. For now the advice from most top brokerages is clear wait and watch rather than trying to catch a falling knife.
Kaynes Technology remains a fundamentally strong company with an impressive Rs 8000 crore plus order book and exposure to high growth sectors like electric vehicles aerospace and IoT enabled electronics.
The 58 percent revenue growth and 102 percent profit growth in Q2 FY26 demonstrate the company’s execution capabilities. However the governance red flags accounting discrepancies and deteriorating cash flow situation have created significant uncertainty.
The 39 percent fall from recent highs may look tempting for value investors but the advice from analysts like JPMorgan to avoid bottom fishing should not be taken lightly. Until the company can demonstrate clean accounting practices improve cash conversion and resolve all disclosure issues the risk reward equation remains unfavorable.
Investors who are already holding the stock may want to wait for Q3 results before making any decisions while those looking to enter fresh should exercise patience and wait for more clarity.
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