Bihar Sponge writes off stock after operator discrepancy

Bihar Sponge Iron Limited wrote off inventory that was not physically available after regaining access to its Chandil plant in February 2026, and recorded Rs 63.81 lakh from identified stock sold. Bihar Sponge said the former operator’s communicated inventory quantities differed substantially from the stock found during its physical verification.

What did Bihar Sponge find at the Chandil plant?

Bihar Sponge found substantial discrepancies between the stock at its Chandil plant and quantities previously communicated by Vanraj Steels Private Limited after the operator abruptly abandoned the site in February 2026. The company regained access after that event and conducted a physical assessment and verification of the inventory.

Bihar Sponge said Vanraj Steels had been in exclusive possession and control of the sponge iron plant during the preceding financial year. As a result, Bihar Sponge said it had not had an opportunity to independently verify inventory, and had updated its books using the operator’s verbal information and representations rather than a physical count.

The company said the quantities furnished by the operator did not accurately reflect the actual stock position found in February 2026. It did not identify individual inventory categories, specify the quantity difference, or disclose a readable rupee amount for the unavailable stock written off in the note to the September 30, 2026 results.

How did Bihar Sponge account for the unavailable inventory?

Bihar Sponge accounted for Rs 63.81 lakh of inventory that it identified and sold during the current financial year, while writing off the balance that was not physically available. The company classified the unavailable balance under other expenses after evaluating its availability, condition and recoverable value.

The filing does not separately quantify the stock write-off within other expenses. Therefore, the reported inventory decline and the quarterly other-expense movement cannot be treated as the write-off amount alone, although both figures cover the period in which the physical assessment took place.

Reported inventories fell by Rs 2.25 crore between March 31, 2026 and September 30, 2026. Over the same six months, current assets declined by Rs 2.75 crore and total assets fell by Rs 4.39 crore, but the financial statements do not allocate those changes solely to the unavailable inventory.

How did the inventory issue affect Bihar Sponge’s expenses?

Bihar Sponge reported other expenses of Rs 9.98 crore for the quarter ended September 30, 2026, compared with Rs 2.06 crore in the June 2026 quarter and Rs 3.06 crore in the September 2025 quarter. The company placed the unavailable inventory write-off in this expense category but did not state its share of the Rs 9.98 crore total.

The September-quarter other-expense figure increased by Rs 7.92 crore from the preceding quarter. That change coincided with the current-year inventory accounting treatment, although the filing gives no breakdown that would allow the effect of the stock write-off to be separated from other expenses.

Bihar Sponge recorded total income of Rs 1.17 crore in the September 2026 quarter, entirely as other income because revenue from operations was nil. In the June 2026 quarter, total income was Rs 6.39 crore, including Rs 6.11 crore arising from liabilities and provisions written back, according to the notes.

Why did Bihar Sponge have no operating revenue?

Bihar Sponge generated no revenue from operations in the quarter and six months ended September 30, 2026 because its plant was under revamping and major maintenance. The company had executed a Facility User Agreement with Amalgam Steel & Power Limited on March 23, 2026.

The company reported a net loss of Rs 10.74 crore for the September 2026 quarter, compared with net profit of Rs 2.48 crore in the June 2026 quarter and Rs 1.75 crore in the September 2025 quarter. For the six months ended September 30, 2026, Bihar Sponge reported a net loss of Rs 8.26 crore, against net profit of Rs 3.86 crore in the comparable 2025 period.

The absence of operating revenue contrasts with the Rs 63.76 crore of net revenue from operations reported in the September 2025 quarter. The company did not disclose a completion date for the revamping and major maintenance, or a date on which operations under the March 2026 facility agreement could resume.

What financial and legal matters remain for Bihar Sponge?

Bihar Sponge reported negative other equity of Rs 132.48 crore at September 30, 2026, compared with negative Rs 124.22 crore at March 31, 2026. Non-current borrowings were Rs 83.98 crore, down from Rs 84.24 crore, while current borrowings were unchanged at Rs 27.46 crore.

The company said the principal amount of the Government of Jharkhand soft loan had been fully paid following a June 9, 2022 Jharkhand High Court direction requiring monthly payments of Rs 1.25 crore. Bihar Sponge disclosed soft-loan interest of Rs 123.62 crore at September 30, 2026, while saying it had provided Rs 27.46 crore in its books and had approached the lender for an interest waiver.

Bihar Sponge also disclosed a Rs 2.15 crore penalty recovered by South East Coalfields Limited for short lifting of coal under a Fuel Supply Agreement. It said its writ petition challenging the decision was dismissed on October 27, 2025 and that it plans to file an appeal in the High Court; pending final settlement, the amount remains included in long-term loans and advances.

The company said it has outstanding claims and recoverable dues from the VSPL Group, while claims against Bihar Sponge have been denied and are subject to adjudication. Bihar Sponge said it is pursuing legal remedies, but did not disclose a claimed amount, expected recovery or timetable connected specifically to the February 2026 inventory discrepancy.

Conclusion

Bihar Sponge’s September 2026 disclosure shows that inventory carried using the former operator’s representations did not match stock found after the company regained plant access in February 2026. It recorded Rs 63.81 lakh from identified stock sold, wrote off unavailable stock through other expenses, and reported inventories of Rs 1.76 crore at September 30, down from Rs 4.02 crore at March 31.

What to watch next is the plant revamping and major maintenance under the March 23, 2026 Facility User Agreement with Amalgam Steel & Power Limited, for which Bihar Sponge gave no completion date. Other disclosed unresolved matters include the planned appeal over the Rs 2.15 crore coal penalty, legal claims involving the VSPL Group, and the request for a waiver of Rs 123.62 crore of soft-loan interest.