BF Utilities auditor retains qualified conclusion over three matters

BF Utilities Limited received a qualified conclusion on its standalone results for the quarter and half year ended September 30, 2026, because the auditor could not determine potential effects of SIAC arbitration claims, possible impairment of a Rs 26.07 crore NHDL investment, and a Rs 37 crore NECE advance outstanding for over 15 years.

Why did BF Utilities receive a qualified conclusion?

BF Utilities received a qualified conclusion because G. D. Apte & Co. said the possible accounting effects of three matters could not be ascertained in the September 30, 2026 standalone financial results. The review was conducted under Standard on Review Engagements 2410, which provides moderate assurance and is narrower in scope than a statutory audit. Except for the possible effects of the identified matters, the auditor said nothing had come to its attention indicating a material misstatement or inadequate disclosure under Regulation 33.

The qualification continued a pattern from earlier reporting periods. The auditor said its report for the quarter and year ended March 31, 2026 carried a qualified opinion, while the reports for the quarter ended June 30, 2026 and the quarter and half year ended September 30, 2025 carried qualified conclusions on the same three matters. The September 2026 review therefore retained unresolved questions over provisions and impairment rather than identifying a new qualification.

What is the SIAC arbitration exposure for BF Utilities?

BF Utilities is the fourth respondent in arbitration before the Singapore International Arbitration Centre, or SIAC, after AIRRO Mauritius Holdings V and transferee Soinfra Enterprises Private Limited alleged that sponsors and promoters failed to provide an exit under the shareholders’ agreement. BF Utilities received the notice on March 27, 2025. The claimants submitted their statement of claim on September 26, 2025, seeking damages equal to a Rs 500 crore investment plus an internal rate of return, or IRR, of 18% from the investment date.

The claimants also sought Rs 70.90 crore relating to NECE shares acquired by AIRRO Mauritius Holdings V under a separate share-purchase agreement, plus pre-award and post-award interest of 18% a year on any monetary award. BF Utilities and the other respondents maintain that the separately acquired shares cannot form part of arbitration under the shareholders’ agreement. They filed their statement of defence on December 24, 2025, while discovery and document production took place from January 21 to April 8, 2026; the respondents filed a rejoinder on July 17, 2026.

The auditor said the impact on BF Utilities could be material if the arbitral tribunal awards the claims. Because the matter is disputed, it could not determine whether BF Utilities should recognise a provision in its standalone results for the September 2026 quarter and half year. Management said, based on legal advice and its own review, that no provision was warranted at September 30, 2026, and said it would continue reviewing the litigation position.

Why is the NHDL investment under review?

The auditor said BF Utilities’ Rs 26.07 crore investment in Nandi Highway Developers Limited, or NHDL, may need an impairment assessment because NHDL’s toll operations ended on September 7, 2024. The toll concession concluded under the February 5, 1998 concession agreement and the June 21, 2024 supplementary agreement involving NHDL, the Government of India and the Government of Karnataka. BF Utilities cited NHDL’s positive net worth in maintaining that its investment remained good.

However, the auditor identified material uncertainty over NHDL’s ability to continue as a going concern because the toll contract was not renewed and management had not disclosed an alternative business plan. In that situation, NHDL may be unable to realise assets and settle liabilities in the normal course of business, the auditor said. The company’s consolidated financial statements for the year ended March 31, 2026 did not disclose this matter, according to the auditor.

NHDL also had not prepared financial results for the quarters ended June 30 and September 30, 2026. The missing results prevented the auditor from ascertaining whether an impairment provision under Indian Accounting Standard 36, or Ind AS 36, was necessary for BF Utilities’ equity investment. This contrasts with BF Utilities’ assessment based on NHDL’s net worth, while the auditor focused on the subsidiary’s lack of renewed toll operations and alternative business plan.

What is the issue with the Rs 37 crore NECE advance?

BF Utilities has an interest-free Rs 37 crore advance to Nandi Economic Corridor Enterprises Limited, or NECE, for acquiring land parcels, and the auditor said it has been outstanding for more than 15 years. BF Utilities said NECE confirms the advance quarterly during audits or limited reviews and that it considers the amount good and recoverable. BF Utilities has not recognised an impairment provision against the balance.

The auditor’s concern is that there has been a substantial delay in identifying and allotting the intended land parcels. It said it could not ascertain either the nature or the current status of NECE’s use of the advance, nor whether impairment should be recognised under Ind AS 36. The qualification does not state that the Rs 37 crore has been lost, but it says the auditor lacked a basis to determine whether no impairment was required.

The advance differs from the NHDL issue because it concerns an interest-free amount provided for land acquisition rather than a Rs 26.07 crore equity investment in a subsidiary whose toll contract ended in September 2024. Both matters nevertheless concern possible impairment under Ind AS 36, and both were included in the qualified conclusion for the September 30, 2026 standalone results.

When will BF Utilities publish its delayed consolidated results?

BF Utilities said it will publish consolidated results for the quarter ended June 30, 2026 and the quarter and half year ended September 30, 2026 once financial results from all named subsidiaries are available. Nandi Infrastructure Corridor Enterprise Limited and NECE had not submitted unaudited results for the June 30, 2026 quarter or the September 30, 2026 quarter and half year. NHDL had not submitted its unaudited results for the September 30, 2026 quarter and half year.

The auditor treated this reporting delay as an emphasis-of-matter item rather than an additional qualification, meaning its conclusion on the standalone statement was not modified for that issue. The auditor also drew attention to BF Utilities’ assessment that certain litigation did not need a provision at September 30, 2026. BF Utilities said it would make accounting adjustments if future review of those matters requires them.

The pending subsidiary results are relevant because NHDL, NECE and Nandi Infrastructure Corridor Enterprise Limited are part of the group for which BF Utilities has deferred consolidated reporting. The SIAC arbitration, meanwhile, continues before the tribunal under its procedural directions following the claimants’ May 13, 2026 reply to the statement of defence and the respondents’ July 17, 2026 rejoinder.

Conclusion

The retained qualified conclusion means BF Utilities’ September 2026 standalone results remain subject to unresolved measurement questions rather than a quantified accounting adjustment. The largest stated claim is Rs 500 crore plus 18% IRR in the SIAC dispute, while the balance-sheet matters concern the Rs 26.07 crore NHDL investment and the Rs 37 crore NECE land advance. Management contests the arbitration and considers the two subsidiary-related balances good or recoverable.

The next disclosures to watch are the subsidiary financial results required for consolidated reporting, any alternative business plan for NHDL after its September 2024 toll-contract expiry, and procedural developments in the SIAC arbitration. BF Utilities has said it will continue reviewing litigation and make accounting adjustments if required, while the tribunal matter proceeds under its directions.