Bihar Sponge Iron Limited review flags Rs 96.16 crore gap

Bihar Sponge Iron Limited’s September 30, 2026 review was qualified after auditors said interest of Rs 123.62 crore on a Jharkhand government soft loan had been provided only to Rs 27.46 crore, leaving a Rs 96.16 crore difference subject to the lender’s response to BSIL’s waiver representations.

What did BSIL’s auditors qualify in the September 2026 results?

Doogar & Associates issued a qualified conclusion on BSIL’s unaudited quarter and half-year financial results for the period ended September 30, 2026, citing four matters: an unprovided coal penalty of Rs 2.15 crore, an unquantified proposed settlement of promoter loans, soft-loan interest provisioning, and disputed balances involving the plant operator. The review report is dated November 13, 2026.

The auditors said that, except for the possible effects of these matters, nothing had come to their attention to indicate that the financial statements failed to make the required disclosures or contained a material misstatement. This is a review conclusion, not an audit opinion: the report says the work was performed under Standard on Review Engagements 2410 and provides moderate rather than audit-level assurance.

BSIL reported a loss before tax of Rs 8.26 crore for the six months ended September 30, 2026, compared with profit before tax of Rs 3.86 crore in the corresponding six months of 2025. Total income fell to Rs 7.56 crore from Rs 154.80 crore, while the company reported no net revenue from operations in the 2026 half year versus Rs 141.26 crore a year earlier.

How large is BSIL’s soft-loan interest provisioning difference?

BSIL’s disclosed soft-loan interest provisioning difference is Rs 96.16 crore, based on accrued interest of Rs 123.62 crore and provision recorded in the books of Rs 27.46 crore. The interest relates to the Government of Jharkhand soft loan under the Jharkhand Industrial Rehabilitation Scheme 2003, according to the auditors’ Note No. 4.

The Rs 27.46 crore provision covers interest only until August 10, 2013. The auditors said the provision level remains subject to approval of BSIL’s representations seeking waiver of the entire interest amount. They did not state that a waiver had been granted, nor did they quantify the eventual accounting adjustment that may follow the lender’s decision.

The underlying principal has been fully paid, the report said. The Jharkhand High Court at Ranchi, through its June 9, 2022 order, directed BSIL to pay Rs 1.25 crore per month, with the payments adjusted against principal. The company subsequently approached the lender for an interest waiver after full principal repayment.

What is the status of the Rs 2.15 crore coal penalty?

BSIL has not made a provision for a Rs 2.15 crore penalty recovered by South East Coalfields Ltd, or SECL, for short lifting of coal under a fuel supply agreement, or FSA. Pending final settlement, BSIL has included the amount within long-term loans and advances rather than recognising a provision, the auditors said.

The dispute has followed several legal and administrative steps. The Chhattisgarh High Court at Bilaspur disposed of BSIL’s earlier writ petition on March 5, 2025, directing the concerned authority to hear the parties and decide the matter, preferably within 60 days from April 21, 2025. BSIL and SECL met on June 19, 2025, but the company said SECL did not accept its representation and disposed of the matter.

BSIL then filed WPC/24721 of 2025 against SECL’s order or decision. That petition was dismissed on October 27, 2025, and the report says BSIL is planning to appeal before the Chhattisgarh High Court. The company’s stated plan to appeal means the Rs 2.15 crore item remained unresolved as of the November 13, 2026 review report.

Why are BSIL’s plant-operator balances uncertain?

The auditors could not comment on whether BSIL needs to adjust the carrying value of balances related to its plant operator because the recoverability and final outcome of the dispute remain uncertain. Management represented that, under the Facility User Agreement, the operator has legitimate claims and dues that are recoverable from it or contractually required to be borne by it.

BSIL has initiated legal action and management does not foresee impairment or a provision against the dues, based on the operator’s contractual obligations and its own assessment of recoverability. The auditors did not endorse that assessment; they said they were unable to comment on adjustments to the related balances and any resulting effect on the financial statements.

This uncertainty sits alongside a balance-sheet change during the six months to September 30, 2026. Trade receivables were Rs 34.16 crore, down from Rs 35.67 crore at March 31, 2026, while other current assets increased to Rs 5.94 crore from Rs 3.46 crore. The filing does not assign either movement to the operator dispute.

What other unresolved obligation did the review identify?

BSIL has approached its promoters for a one-time settlement of their loans, but the amount is neither quantified nor disclosed in the reviewed results. The proposed settlement is intended to occur subsequent to, and along the lines of, the settlement reached with the Government of Jharkhand for the soft loans, according to Note No. 3.

Because no amount was quantified, the report provides no basis to calculate the possible effect of a promoter-loan settlement on BSIL’s liabilities or equity. At September 30, 2026, BSIL reported non-current borrowings of Rs 83.98 crore, compared with Rs 84.24 crore at March 31, 2026, and current borrowings of Rs 27.46 crore in both periods.

BSIL’s total assets declined to Rs 87.88 crore at September 30, 2026 from Rs 92.27 crore at March 31, 2026. Other equity was negative Rs 132.48 crore, compared with negative Rs 124.22 crore at the prior year-end, reflecting the Rs 8.25 crore loss after comprehensive income for the six months ended September 30, 2026.

Conclusion

The qualified review identifies accounting uncertainty across a Rs 96.16 crore soft-loan interest difference, a Rs 2.15 crore coal penalty, operator-related dues of undisclosed value and promoter-loan settlement terms that remain unquantified. These items matter because their final resolution could require adjustments to BSIL’s carrying values, provisions, liabilities or reported equity.

The next disclosed developments to watch are BSIL’s planned appeal following the October 27, 2025 dismissal of its SECL petition, the Government of Jharkhand’s response to the requested interest waiver, and the outcome of legal action concerning the plant operator. Any quantified promoter-loan settlement would also clarify an obligation that the September 2026 review did not measure or disclose.