ARSS auditor retains qualification over Rs 708.3196 crore asset

ARSS Infrastructure Projects Limited’s auditor retained a qualified conclusion for the quarter ended September 30, 2026, citing Rs 708.3196 crore of arbitration claims carried as a receivable and Rs 5.6032 crore of interest accrued on an Ocean Capital Market Limited loan outside the National Company Law Tribunal-approved resolution plan.

Why did ARSS’s auditor retain a qualified conclusion?

ARSS’s auditor retained the qualified conclusion because the two matters identified in its May 30, 2026 audit report remained unresolved at September 30, 2026. The auditor said ARSS had recognised arbitration claims totalling Rs 708.3196 crore as income under exceptional items for the year ended March 31, 2026 and recorded the amount as Claims Receivable within Other Financial Assets.

The claims remain subject to arbitration proceedings, and the auditor said their outcome and receivability had not been established at September 30, 2026. In the auditor’s view, recognising the claims did not comply with Indian Accounting Standard, or Ind AS, 115 on revenue from contracts with customers, Ind AS 109 on financial instruments, and Ind AS 37 on provisions, contingent liabilities and contingent assets.

The auditor said Ind AS 115 permits variable consideration in revenue only when it is highly probable that a significant reversal of cumulative revenue will not occur. It also said Ind AS 109 requires an unconditional contractual right to receive cash before recognising a financial asset, while Ind AS 37 prevents recognition of a contingent asset until an inflow of economic benefits is virtually certain.

The Rs 708.3196 crore balance continued to be carried as Claims Receivable at September 30, 2026, while comparative figures for the quarter and year ended March 31, 2026 remained affected. The limited review was conducted under Standard on Review Engagements 2410, which provides moderate assurance and is narrower in scope than an audit under the Companies Act, 2013.

What is the objection to ARSS’s interest accrual?

The auditor objected because ARSS accrued Rs 5.6032 crore of interest for the quarter ended September 30, 2026 at 9% a year on a loan from Ocean Capital Market Limited. The report identifies Ocean Capital Market Limited as the successful resolution applicant and a related party, while stating that the National Company Law Tribunal, or NCLT, approved resolution plan does not contemplate interest payments on that loan.

ARSS classified the Ocean Capital Market Limited loan as a secured borrowing and supported the 9% annual interest accrual with a loan sanction letter. The auditor said the accrual created a financial obligation beyond the approved resolution plan and therefore overstated the quarter’s interest expense and finance cost by Rs 5.6032 crore.

ARSS told the auditor that its Audit Committee approved the transaction on May 30, 2026 and that the Board approved it on the same date. However, the auditor said it could not satisfy itself that secured-borrowing classification was appropriate at September 30, 2026 because no executed assignment agreement was available and the particulars of charge had not been registered with the Registrar of Companies.

This qualification is separate from the Rs 708.3196 crore arbitration-claim receivable, although both matters underpin the modified conclusion. The report does not state that the May 30, 2026 Audit Committee and Board approvals addressed the missing assignment agreement or the unregistered charge.

How did ARSS’s September-quarter results change?

ARSS reported revenue from operations of Rs 23.1091 crore for the quarter ended September 30, 2026, compared with Rs 14.5291 crore in the quarter ended June 30, 2026 and Rs 11.41 crore in the quarter ended September 30, 2025. ARSS identifies construction contracts as its only reportable operating segment under Ind AS 108, so the filing does not provide a segment-level revenue split.

The loss before tax and exceptional items narrowed to Rs 8.9658 crore in the September 2026 quarter from Rs 10.9312 crore in June 2026, but was wider than Rs 4.1598 crore a year earlier. Finance cost was Rs 5.7702 crore in the September quarter, compared with Rs 5.6784 crore in June 2026; the disputed Rs 5.6032 crore interest accrual is included within the September-quarter finance-cost issue identified by the auditor.

For the half year ended September 30, 2026, ARSS reported revenue from operations of Rs 37.6382 crore, against Rs 30.0919 crore in the corresponding half year of 2025. Its half-year loss after tax was Rs 19.026 crore, versus Rs 3,343.2251 crore a year earlier, when comparative results included exceptional-item effects; the filing does not calculate a revised result excluding the qualified matters.

What other matters did ARSS’s auditor report?

The auditor highlighted, without modifying its conclusion on that basis, a search and seizure operation conducted by the Enforcement Directorate, or ED, at ARSS’s registered office on September 11, 2026. ARSS said the enquiry concerned loans obtained from SREI Infrastructure Finance Ltd and SREI Equipment Finance Ltd.

The report treats the September 11, 2026 ED action as an emphasis of matter rather than another basis for qualification. It explicitly states that the conclusion was not modified for this disclosure, unlike the Rs 708.3196 crore claim-recognition matter and the Rs 5.6032 crore interest-accrual matter.

The auditor also recorded the history of the comparative reporting. ARSS’s figures for the quarter ended September 30, 2025 were reviewed by a predecessor auditor that issued a qualified conclusion on November 10, 2025, while the current auditor issued a qualified opinion on the year ended March 31, 2026 on May 30, 2026.

ARSS’s Board approved the September 2026 standalone results on November 10, 2026. On the same date, it approved a postal-ballot process that includes proposals for related-party transactions and an increase in authorised share capital from Rs 500 crore to Rs 1,100 crore, subject to shareholder approval.

Conclusion

The September 2026 limited review leaves ARSS with a continuing qualification focused on recognition and measurement. The auditor disputes whether the Rs 708.3196 crore arbitration claims meet the conditions for income and financial-asset recognition, and says the Rs 5.6032 crore interest accrual created an obligation not envisaged by the NCLT-approved resolution plan.

The next disclosed events include the postal-ballot timetable: November 13, 2026 was the cut-off date, remote e-voting began on November 17, 2026 and was scheduled to end on December 16, 2026. Further disclosures may also show whether arbitration proceedings, claim receivability, the assignment agreement and registration of charge for the Ocean Capital Market Limited borrowing are resolved.