Facing one of its sharpest market corrections since listing, Kaynes Technology moved quickly on Monday to address a series of governance and accounting concerns raised in recent brokerage notes (most prominently Kotak Institutional Equities’ report) that triggered a near-50 percent plunge in the stock over the past week.

The company admitted that a related-party transaction with its smart-metering subsidiary Iskraemeco had not been disclosed in its standalone FY24 financials, though it was correctly reported in the consolidated results. “They accepted it as a mistake. The auditor also missed it. They said they will rectify the disclosure and are likely to change the auditor,” said Praveen Sahay, analyst at PL Capital.

Elara Securities’ post-call note added that Kaynes intends to strengthen internal reporting by introducing software that ensures automatic contra-entry checks and may 'contemplate replacing current auditors with more reputed firms'.

On a business update call with analysts this morning, the management acknowledged 'reporting lapses' in standalone financial statements, offered detailed reconciliations of goodwill and intangible assets arising from its recent acquisitions, and signalled its intent to replace its statutory auditor. Analysts described the tone of the call as 'submissive'.

A major trigger of the selloff was Kotak’s assertion that Kaynes’ acquisition accounting was opaque, especially the treatment of goodwill and intangible assets in Iskraemeco and Sensonic.