Bihar Sponge Iron results qualified on unresolved balances

Bihar Sponge Iron Limited’s results for the quarter and half year ended September 30, 2026 received a qualified conclusion because Rs 123.62 crore of Government of Jharkhand soft-loan interest was only partly provided, while a Rs 2.15 crore coal penalty and plant-operator recoverables remained unresolved. Bihar Sponge Iron reported a Rs 8.26 crore pre-tax loss for the half year.

What did the auditor qualify in Bihar Sponge Iron’s results?

Doogar & Associates issued a qualified conclusion on Bihar Sponge Iron’s unaudited results for the quarter and six months ended September 30, 2026. Its review report, dated November 13, 2026, identified matters in notes 2, 3, 4 and 6 concerning the South East Coalfields Ltd. penalty, promoter-loan settlement, Government of Jharkhand soft-loan interest and dues involving the plant operator.

The auditor said that, except for the possible effects of these matters, nothing had come to its attention causing it to believe that the results failed to disclose information required under Regulation 33 of the Securities and Exchange Board of India, or SEBI, listing regulations. The review was performed under Standard on Review Engagements 2410, which the report says is based mainly on inquiries and analytical procedures and provides less assurance than an audit.

The qualification accompanied a marked shift in Bihar Sponge Iron’s reported half-year performance. Net revenue from operations was nil for the six months ended September 30, 2026, compared with Rs 141.26 crore in the corresponding six months of 2025. Total income was Rs 7.56 crore in the 2026 half year, comprising other income, compared with Rs 154.80 crore in the previous-year period.

Bihar Sponge Iron recorded total expenses of Rs 15.81 crore for the six months ended September 30, 2026, against Rs 150.93 crore a year earlier. That produced the reported pre-tax loss of Rs 8.26 crore, compared with a pre-tax profit of Rs 3.86 crore in the six months ended September 30, 2025; the filing reported no current or deferred tax charge in either period.

How much soft-loan interest has Bihar Sponge Iron provided?

Bihar Sponge Iron has provided Rs 27.46 crore against Rs 123.62 crore of interest on the Government of Jharkhand soft loan under the Jharkhand Industrial Rehabilitation Scheme 2003. The amount recorded in the books covers interest only until August 10, 2013, and the company has approached the lender for waiver of the entire interest amount.

The report states that the principal of the Government of Jharkhand soft loan has been fully paid. The Jharkhand High Court at Ranchi directed Bihar Sponge Iron on June 9, 2022 to pay Rs 1.25 crore a month, with those payments adjusted against principal; the filing does not state that the lender has approved the requested interest waiver.

The qualification also covers a possible one-time settlement of loans from Bihar Sponge Iron’s promoters. Management told the auditor that any settlement would follow, and be on the lines of, the settlement reached with the Government of Jharkhand on its soft loans. However, the filing says the promoter-loan settlement amount has neither been quantified nor disclosed.

The balance-sheet figures show non-current borrowings of Rs 83.98 crore at September 30, 2026, compared with Rs 84.24 crore at March 31, 2026. Current borrowings were unchanged at Rs 27.46 crore on both dates, while other equity stood at negative Rs 132.48 crore at September 30, 2026, compared with negative Rs 124.22 crore at March 31, 2026.

Why is the SECL coal penalty still unresolved?

Bihar Sponge Iron has not made a provision for Rs 2.15 crore recovered by South East Coalfields Ltd., or SECL, for short lifting of coal under a Fuel Supply Agreement, or FSA. Pending final settlement, the company has included the recovered amount in long-term loans and advances rather than recognising it as a charge in the reported results.

The earlier writ petition was disposed of by the Chhattisgarh High Court at Bilaspur on March 5, 2025. The court directed the concerned authority to give Bihar Sponge Iron and SECL an opportunity of hearing and to decide the matter in accordance with law, preferably within 60 days from April 21, 2025; the parties subsequently met on June 19, 2025.

According to the auditor’s report, SECL did not consider Bihar Sponge Iron’s representation and disposed of the matter. Bihar Sponge Iron filed writ petition WPC/24721 of 2025 against SECL’s decision, but the Chhattisgarh High Court dismissed that petition on October 27, 2025. The company said it was planning to file an appeal before the High Court.

The Rs 2.15 crore item is distinct from Bihar Sponge Iron’s reported non-current asset base of Rs 44.32 crore at September 30, 2026. Property, plant and equipment accounted for Rs 41.12 crore of that total, while capital work in progress was Rs 0.16 crore; the filing does not separately quantify the long-term loans and advances line containing the SECL amount.

What is uncertain about Bihar Sponge Iron’s plant-operator recoverables?

The auditor said it was unable to comment on whether an adjustment was necessary to the carrying value of balances associated with Bihar Sponge Iron’s plant operator. Management represented that, under a Facility User Agreement, there are legitimate claims and dues recoverable from, or contractually required to be borne by, the operator, but the filing does not disclose the monetary value of those balances.

Bihar Sponge Iron told the auditor that it had initiated an appropriate legal course and did not foresee impairment or a provision against the dues. Management based that assessment on the operator’s contractual obligations and its view of recoverability, while the auditor said it could not comment on the dispute’s outcome, the extent of recovery or any consequential effect on the September 30, 2026 statements.

The filing does not link the plant-operator matter to a specific balance-sheet line. Trade receivables were Rs 34.16 crore at September 30, 2026, down from Rs 35.67 crore at March 31, 2026, while other current assets rose to Rs 5.94 crore from Rs 3.46 crore over the same period. Those movements cannot be attributed to the operator dispute from the disclosed information.

Bihar Sponge Iron’s total assets were Rs 87.88 crore at September 30, 2026, compared with Rs 92.27 crore at March 31, 2026. Inventory declined to Rs 1.76 crore from Rs 4.02 crore, while cash and cash equivalents increased to Rs 0.86 crore from Rs 0.67 crore; neither figure resolves the uncertainty over the undisclosed operator-related balances.

Conclusion

Bihar Sponge Iron’s qualified conclusion concerns several unresolved accounting and recovery matters rather than a single stated adjustment. The largest disclosed item is Rs 123.62 crore of Government of Jharkhand soft-loan interest, against which Rs 27.46 crore has been provided, alongside the unprovided Rs 2.15 crore SECL penalty and plant-operator balances whose recoverability the auditor could not assess.

Next, Bihar Sponge Iron has said it plans to appeal following the October 27, 2025 dismissal of its SECL writ petition. The filing also leaves two outcomes pending: the Government of Jharkhand’s response to the requested full interest waiver and the unquantified proposed settlement of promoter loans, as well as the legal outcome affecting plant-operator dues.