Kaarya's auditor won't stand behind its ₹2 cr profit. There's a ₹7.58 cr GST hole.
A qualified audit opinion says Kaarya Facilities understated interest costs on unpaid GST and hasn't provided for staff gratuity. The company's entire market cap is ₹26 crore.
What's new
- Auditors issued a qualified opinion on Kaarya's FY26 results, citing unbooked interest on ₹7.58 cr in GST liabilities.
- The omission overstates the reported ₹2.02 cr net profit on ₹38.89 cr revenue.
- Auditors also flagged unquantified gratuity obligations and unreconciled trade receivable/payable balances.
Why this matters
The auditor has effectively said the numbers don't add up. For a company with a ₹26 crore market cap, a ₹7.58 crore liability that wasn't provisioned for is not a rounding error. It is larger than three years of reported profit.
What we're watching
- Whether Kaarya restates its FY26 numbers after the qualification.
- SEBI's response to the governance lapses flagged in the audit report.
- The actual quantum of the unbooked gratuity and trade-balance discrepancies.
The full read
Kaarya Facilities reported FY26 net profit of ₹2.02 crore on revenue of ₹38.89 crore. Its auditor, Piyush Kothari & Associates, won't stand behind those numbers. The core issue is ₹7.58 crore in outstanding GST liabilities for which the company never booked interest. That omission alone overstated the profit. The auditor also flagged unquantified gratuity obligations for field staff and unreconciled balances across trade receivables and payables. For context, the company's entire market capitalization is ₹26 crore. A liability of ₹7.58 crore is not a detail. It is nearly four years of reported profit and 20% of annual revenue, sitting unprovisioned on the balance sheet. The qualification makes the audited numbers unreliable. Hardly a rounding error.
Questions answered
- What did the auditor find wrong with Kaarya's FY26 numbers?
- The auditor said Kaarya failed to account for interest on ₹7.58 crore in unpaid GST liabilities. This error made the company's reported ₹2.02 crore net profit higher than it should have been.
- How significant is the GST liability relative to the company?
- The ₹7.58 crore GST interest liability is nearly four times the company's reported net profit and about 20% of its ₹38.89 crore revenue. Kaarya's total market capitalization is only ₹26 crore.
- What other accounting issues did the auditor flag?
- The audit report also cited unprovided gratuity for field staff and unreconciled balances in trade receivables and payables. The exact amounts for these are not yet quantified.
- Does the qualified opinion mean the results are useless?
- A qualified opinion means the auditor cannot certify the financials as a whole. Investors should treat the reported ₹2.02 crore profit as unreliable until the company corrects the GST provision and resolves the other issues.