Kaynes Technology's Wild Week: Kotak Report, 40% Stock Crash and Why Brokerages Still See 100%+ Upside in This Semiconductor Play

Published: December 10, 2025 | India Markets & Semiconductors

Kaynes Technology India Ltd has just lived through one of the most dramatic weeks any mid-cap tech stock has seen in recent years — a sharp 40%+ correction, allegations of aggressive accounting, a social-media storm around corporate governance, and then a powerful rebound after global brokerages reiterated “buy” calls with targets implying more than 100% upside. ^[1]

On December 10, 2025, the dust is still swirling. A new “stock to buy” note from Trade Brains highlights Kaynes Technology as a semiconductor proxy that could deliver returns of about 102%, leaning heavily on Macquarie’s Rs 7,700 target price. ^[2]

Here’s a complete explainer of the Kotak–Kaynes saga, the latest clarifications, and what today’s news means if you track India’s emerging semiconductor and electronics manufacturing theme.

What Happened This Week? The Quick Recap

Trigger (December 3): Kotak Institutional Equities published a detailed report raising red flags around Kaynes Technology’s FY25 numbers — from missing related‑party disclosures to aggressive capitalization of technical know‑how and high borrowing costs. ^[3]
Selling wave (4–8 December): The stock dropped around 30% over four trading sessions, at one point wiping out nearly Rs 10,000 crore in market value and leaving it roughly 40% lower for the month. ^[4]
Clarifications (5–9 December): Kaynes issued detailed exchange filings and held an analyst call, admitting disclosure lapses in standalone financials but strongly defending its accounting policies and denying any wrongdoing. ^[5]
Rebound (December 9): Spurred by supportive notes from Macquarie and JPMorgan, shares surged 10–18% intraday, closing about 14% higher near Rs 4,350 after hitting a 52-week low earlier in the session. ^[6]
December 10 headlines:
- Trade Brains flagged Kaynes Tech as a “semiconductor stock to buy” with potential 102% upside, based on Macquarie’s Rs 7,700 target. ^[7]
- Business Today and Capital Market reported on a fresh clarification from the company denying plans to change its statutory auditors , countering an earlier Moneycontrol report that implied an auditor switch was coming. ^[8]
- A detailed Moneylife “Accounting Storm” investigation and explainer pieces from platforms like INDmoney continued to frame the debate around governance, transparency and investor trust. ^[9]

Why Did Kotak’s Note Hit Kaynes Technology So Hard?

Kaynes Technology isn’t a small, obscure company. Since listing in 2022, it has become a poster child for India’s electronics and semiconductor ambitions, growing revenue around 6.5x from roughly Rs 420 crore in FY21 to over Rs 2,700 crore in FY25 and raising large QIPs to fund OSAT (chip packaging) and PCB capacity. ^[10]

That’s exactly why Kotak’s skeptical report — and subsequent blogs and media coverage — rattled the market so badly. The key issues were:

1. Missing Related‑Party Disclosures

Kotak highlighted a striking mismatch between the FY25 financials of Kaynes Technology, its manufacturing arm Kaynes Electronics Manufacturing, and its smart‑meter subsidiary Iskraemeco. ^[11]

According to Iskraemeco’s books, the company:

Purchased about Rs 180 crore of goods from Kaynes Electronics Manufacturing
Owed Rs 320 crore to Kaynes Technology and Rs 180 crore to Kaynes Electronics Manufacturing at year‑end
Showed Rs 190 crore in receivables from Kaynes Technology

Yet these large transactions didn’t appear in the related‑party notes of the parent or its other subsidiary — exactly the kind of gap governance‑focused investors worry about.

2. A Sharp Jump in Contingent Liabilities

Kotak flagged a near‑doubling of contingent liabilities to around Rs 520 crore , roughly 18% of net worth , driven by performance guarantees and corporate guarantees linked to the Iskraemeco acquisition. ^[12]

While such guarantees are common in infrastructure and smart‑meter contracts, the magnitude raised concern that risks were building up faster than disclosures suggested.

3. Goodwill, “Magical” Profits and Complex Acquisition Accounting

Moneylife’s deep dive framed Kotak’s first allegation as the “magical profit at Iskraemeco”. Kaynes’ consolidated numbers seemed to show the subsidiary adding nearly Rs 49 crore to H2 FY25 profit after tax, despite its standalone filings showing barely Rs 0.6 crore profit for the full year. ^[13]

To Kotak, this looked like either:

A huge loss before acquisition followed by an improbably fat margin afterwards, or
Some aggressive purchase‑price allocation and profit recognition choices.

Kotak also questioned why Kaynes reported a large increase in capital reserves instead of the big jump in goodwill or customer‑contract intangibles one would normally expect when buying businesses like Iskraemeco and Sensonic. ^[14]

4. Aggressive Capitalization of “Technical Know‑How”

Another flashpoint: Rs 180 crore (around 6.5% of revenue ) was added to technical know-how and other intangible assets in FY25, while only about Rs 14 crore was reported as R&D expense. That implies roughly 94% of R&D‑like spend was capitalized , flattering near‑term profits. ^[15]

For an investor, heavy capitalization can mean:

Today’s earnings look stronger
But future years will bear higher amortization or sudden write‑downs if those intangibles don’t deliver.

5. Negative Cash Flows and a High Implied Interest Cost

Kotak’s note also pointed to:

Negative operating cash flow of over Rs 1,000 crore
A cash‑conversion cycle stretched by around 22 days
An average borrowing cost it calculated at 17.7% , far above what a company of Kaynes’ perceived quality should be paying. ^[16]

Taken together, the report suggested that Kaynes’ rapid growth might be masking fragile cash flows and over‑optimistic accounting.

How Did Kaynes Technology Respond?

Management didn’t stay silent. Over the last few days, Kaynes has released written clarifications to the exchanges, spoken to media, and held an extended analyst call — much of which has now been dissected in detail by Moneylife, INDmoney and brokerage notes. ^[17]

Broadly, the company’s defense remains on three pillars: the numbers are right at the consolidated level, the lapses are mostly in disclosures, and the accounting is conservative rather than aggressive.

1. The Related‑Party “Confession”

On related‑party transactions, Kaynes admitted that certain large balances between Kaynes Electronics and Iskraemeco were not disclosed in standalone statements , calling it an inadvertent oversight. ^[18]

The explanation:

Iskraemeco was a regular customer and supplier before the acquisition and became a related party mid‑year.
The accounting system didn’t re‑tag all the transactions correctly for the standalone disclosure note, even though the entries existed in the ledgers.
At the consolidated level, all such transactions were eliminated as required by Ind AS.

Management has since:

The disclosures have been corrected.
Started implementing an automated contra‑entry system for related‑party transactions to prevent repeat errors, as highlighted in a Prabhudas Lilladher analyst‑meet note. ^[19]

2. Iskraemeco, Goodwill and the “Kitchen Sink”

On the “magical” swing in Iskraemeco’s profits, Kaynes’ CFO told analysts that:

Before the acquisition closed, Iskraemeco took a one-time “big bath” , writing off about Rs 50 crore of dead inventory and other assets, which pushed H1 results deep into loss.
Post‑acquisition, with the clean‑up done, H2 revenue jumped to around Rs 530 crore and profit to about Rs 49 crore — implying a net margin closer to 9–10% , not the 28% Kotak had inferred. ^[20]

On goodwill and intangibles, management argued that:

About Rs 115 crore of the purchase price was allocated to customer contracts (treated as a finite‑life intangible) rather than goodwill, which is more conservative because it must be amortized over time.
When combined with the Sensonic deal, this neted out to a small negative adjustment on the balance sheet, explaining why headline goodwill didn’t spike. ^[21]

3. Capitalized Technical Know‑How: Not Just R&D, Says Management

Kaynes has broken down the controversial Rs 180 crore capitalized under technical know-how into three buckets: ^[22]

Rs 115 crore — fair value of customer contracts acquired with Iskraemeco (treated as an intangible under Ind AS 103).
Rs 26 crore — specific development costs for integrating and upgrading smart‑meter platforms.
Rs 39 crore — in‑house R&D that management says met the strict criteria for capitalization under Ind AS 38.

Critics respond that regardless of the technicalities, such a high capitalization ratio can obscure the true cash cost of innovation. Management counters that the mix of acquired contracts and genuine development spending justifies the treatment.

4. Borrowing Costs and Cash Flows

On that eye‑watering 17.7% implied interest cost, Kaynes says Kotak’s math left out a big piece of the picture:

The brokerage divided reported interest expense by on‑book debt.
But a lot of Kaynes’ working capital is funded through bill discounting and supply‑chain finance , where charges may sit outside “finance cost” in the P&L.

When those facilities are included, the company says the effective borrowing rate is closer to 10–12% , and applying Kotak’s method to earlier years would produce absurdly high numbers (over 25% for FY24), showing the limitation of the approach. ^[23]

Management has also reiterated its guidance that:

Net working‑capital days should start improving by FY26
Cash generation will strengthen as smart‑meter receivables normalize and new OSAT/PCB lines ramp up. ^[24]

The Auditor‑Change Rumor — and a Firm Denial

On 8 December, a Moneycontrol report suggested that Kaynes planned to change its statutory auditor after the disclosure lapse, adding fuel to the governance fire. ^[25]

Within 24 hours, the company:

Filed a formal clarification with NSE and BSE, explicitly stating that no discussions, negotiations or proposals on changing auditors had gone to the Board or Audit Committee. ^[26]
Said the media article was based on a misinterpretation of general remarks made during an interaction.
Confirmed there are no regulatory or legal proceedings underway on this issue and that all material information has already been disclosed. ^[27]

For now, the company’s message is clear: auditor stays; focus is on improving systems, not replacing firms.

How the Market Has Reacted: From Darling to “Cheapest in Coverage”

The market’s verdict has been brutal — and then suddenly forgiving.

Kaynes Tech is down roughly 40% over the past month , making it the cheapest stock in JPMorgan’s Asia-Pacific coverage after the correction. ^[28]
Year‑to‑date, the stock has lost more than 40–45% even after the latest bounce, according to multiple brokerage and media estimates. ^[29]
On 9 December alone, shares rebounded around 14% , with intraday gains of up to 18%, as investors digested management’s clarifications and fresh buy calls from Macquarie and JPMorgan. ^[30]

Mutual funds have been heavy holders: an Economic Times analysis showed about 1.29 crore shares held across 33 fund houses as of October 2025, prompting retail investors to ask whether their own portfolios were indirectly exposed to the drama. ^[31]

Why Brokerages Still See 100%+ Upside

Despite the governance overhang, a majority of covering analysts have not abandoned the long‑term story.

Supportive Views

Macquarie: Maintains “Outperform” with a Rs 7,700 target , implying more than 100% upside from pre‑rebound levels. It calls management’s explanations “reasonable” but stresses the need for better cash flows and possibly stronger audit credentials over time. ^[32]
JPMorgan: Rates the stock “Overweight” with a Rs 7,550 target , and a bear‑case fair value around Rs 4,900 . It describes Kaynes as the cheapest in its coverage universe after the sell‑off, while guaranteeing that working‑capital discipline is crucial. ^[33]
Prabhudas Lilladher: After the analyst meet, the brokerage kept a “Buy” rating with a Rs 5,624 target , projecting FY25–28 revenue and profit CAGR above 40% and modest margin expansion as OSAT and PCB businesses ramp up. ^[34]

Trade Brains’ 10 December “stock to buy” article essentially packages these bullish calls into a retail‑friendly narrative, arguing that if Kaynes executes on its OSAT and PCB plans and tightens governance, the current volatility could set up a multiyear compounding story. ^[35]

The Outlier: Kotak’s Caution

Kotak itself remains wary. In a separate broker‑recommendation round‑up, it carried a “Reduce” rating with a Rs 6,180 target , having trimmed EPS estimates to reflect slower subsidy receipts and a more stretched capex schedule. ^[36]

Kotak’s core message is less about near‑term demand and more about trust in the numbers — especially the interplay of cash flows, contingent liabilities and capitalized intangibles.

Why Kaynes Matters: India’s OSAT and Semiconductor Ambitions

Part of the reason this saga is attracting disproportionate attention is that Kaynes sits at the crossroads of several strategic themes:

It is building India’s first private OSAT (outsourced semiconductor assembly and test) facility in Sanand, Gujarat — a key piece of the Semicon India puzzle. ^[37]
It is investing heavily in advanced PCB manufacturing in Chennai , hoping to locate high‑end boards that India currently imports. ^[38]
It has significant presence across automotive, industrial, defense, railways, medical electronics and smart meters , making it a diversified ESDM platform rather than a single‑product bet. ^[39]
Management has articulated an ambitious goal of reaching around $2 billion in revenue by FY30 , driven largely by OSAT and PCB businesses, backed by thousands of crores of capex — much of it leveraging government incentives under PLI and Semicon India schemes. ^[40]

In other words, Kaynes is more than just another mid‑cap stock — it is a test case of whether India can grow complex, capital‑intensive electronics champions without compromising on governance and transparency.

Key Risks and What Investors Will Watch Next

For investors trying to make sense of the 10 December headlines, here are the main moving parts to watch over the next few quarters:

Disclosure Quality in FY26 Reports
- Do related‑party notes, segment disclosures and contingent‑liability tables become clearer and more granular?
- Does the promised RPT‑tracking software actually reduce disclosure errors? ^[41]
Regulatory Posture
- As of now, Kaynes says there are no regulatory or legal proceedings around these issues. Any future SEBI or stock‑exchange action would materially change the narrative. ^[42]
Cash Flow and Working Capital
- The bull case assumes that receivable days fall, smart‑meter exposure normalizes and operating cash flow turns convincingly positive by FY26–27. If that doesn’t happen, the rich valuation will be hard to defend. ^[43]
Execution of OSAT/PCB Capex
- Semicon projects are large, complex and prone to delays. The market will watch commissioning timelines, subsidy achievements and utilization ramp‑up very closely. ^[44]
Auditor Relationship and Board Oversight
- Even though management has denied any immediate auditor change, investors may still expect visible strengthening of audit committees, internal controls and independent oversight over time. ^[45]

Should You Buy, Hold or Avoid Kaynes Technology Now?

From an editorial perspective, three things are clear:

The business opportunity is real.
India’s electronics and semiconductor push is structural, not cyclical, and Kaynes is well‑placed in OSAT, PCB and diversified EMS, with a strong order book and aggressive capex pipeline. ^[46]
The governance questions are serious, not cosmetic.
Even if every accounting choice is technically compliant, missing related‑party disclosures of this size and such heavy capitalization of intangibles demand stronger systems, more conservative presentation and perhaps a cultural shift around transparency. ^[47]
The risk–reward is now extreme on both sides.
With the stock down sharply from its highs yet still trading at a premium multiple, future returns will depend less on headline growth and more on how convincingly the company can rebuild trust — with regulators, auditors, institutions and retail shareholders alike. ^[48]

Nothing in this article is investment advice. If you are considering Kaynes Technology as a semiconductor or OSAT proxy, it’s essential to:

Read the full clarifications and annual reports
Track future disclosures closely
Assess how much governance risk you’re comfortable taking, even with a potential 100%+ upside on paper.