Coffee Day Q3 Profit Hits ₹55 Cr, But Auditor's Disclaimer Raises Serious Doubts

Introduction: A Tale of Two Narratives

Coffee Day Enterprises Limited (CDEL) has presented a complex picture to its investors with its financial results for the quarter ending December 31, 2025. On the surface, the company reported a significant profit, marking a substantial turnaround from the previous year. However, this positive development is heavily clouded by a 'disclaimer of conclusion' from its statutory auditors, Venkatesh & Co., who have highlighted critical uncertainties regarding the company's financial statements and its ability to continue as a going concern.

Q3 Financial Performance: A Closer Look

For the third quarter of fiscal year 2026, CDEL announced a consolidated Profit After Tax (PAT) of ₹55.30 crore. This figure stands in stark contrast to the loss of ₹10.28 crore reported in the same quarter of the previous fiscal year. The company's revenue from operations also saw a modest growth of 2.1%, reaching ₹286.39 crore.

A significant portion of this reported profit did not come from core operations. The financial statements reveal that the bottom line was substantially boosted by a 226% surge in 'other income' and the inclusion of ₹62.48 crore from 'exceptional items'. This reliance on non-operational income sources raises questions about the sustainability of the company's profitability.

Subsidiary Performance

The company's primary subsidiary, Coffee Day Global Limited (CDGL), which operates the café chain, also showed improved results. CDGL reported a PAT of ₹31 crore for Q3 FY26, a strong recovery from a loss of ₹11 crore in the corresponding period last year. Its revenue grew by 4.8%. In contrast, CDEL's standalone revenue, which reflects its performance as a holding company, declined by 7.2% year-over-year, indicating continued stress at the parent level.

The Auditor's Critical Disclaimer

The most significant aspect of CDEL's recent financial disclosure is the disclaimer from its auditors. A disclaimer of conclusion is issued when an auditor is unable to obtain sufficient appropriate evidence to form an opinion on the financial statements. This is a serious red flag for investors.

The auditors, Venkatesh & Co., cited several unresolved issues:

• Recoverability of Dues: The auditors could not verify the recoverability of substantial dues owed to the company. These amounts total ₹1,519.21 crore on a standalone basis and a massive ₹3,372.83 crore for the group. While the management has expressed confidence in recovering these funds, the auditors found insufficient evidence to support this claim.
• Going Concern Uncertainty: The auditors have explicitly raised doubts about the company's ability to continue as a 'going concern'. This term refers to a company's ability to meet its financial obligations and continue operations for the foreseeable future, typically at least the next 12 months.
• Incomplete Financial Data: The audit was hampered by the unavailability or lack of review of financial statements for some subsidiaries and joint ventures. The management had to rely on the last available financial data for these entities.
• Unrecognized Liabilities: A financial guarantee of approximately ₹103.27 crore, which has been invoked by lenders, has not been recognized as a liability in the financial statements pending restructuring.

Management's Stance vs. Auditor's Findings

Despite the auditors' severe reservations, CDEL's management has prepared the financial results on a 'going concern' basis. The company has stated that it is in arbitration proceedings to recover dues from certain entities and remains confident in its ability to manage its liabilities. However, the gap between the management's outlook and the auditor's inability to verify these claims remains a primary concern.

Context from Previous Quarters

The financial pressures are not new. In the preceding quarter (Q2 FY26, ended September 30, 2025), CDEL reported a consolidated revenue of ₹280 crore, up 4% year-over-year. However, its net loss for that quarter widened to ₹12 crore from a ₹3 crore loss in the prior year, primarily due to high finance costs. This pattern of revenue growth failing to translate into operational profitability underscores the challenges the company faces.

Analysis and Market Implications

The headline profit figure for Q3 FY26 is misleading when viewed in isolation. The profit is heavily dependent on exceptional and non-operational income, while the core business continues to face challenges. The auditor's disclaimer effectively invalidates the reliability of the reported numbers for investment decision-making.

The 'going concern' warning is the most critical issue. It signals a real risk to the company's operational and financial stability. For investors, this means the underlying value of the company's equity is highly uncertain. The unverified dues represent a significant portion of the company's assets, and any failure to recover them could severely impact its net worth, which stood at ₹2,954 crore on a consolidated basis as of September 2025.

Conclusion

Coffee Day Enterprises is at a critical juncture. While the Q3 profit figure suggests a positive turn, the accompanying auditor's disclaimer paints a grim picture of its financial health. The company is burdened by high debt, significant unrecovered dues, and a lack of verifiable financial data from all its entities. Until the management can concretely address the serious issues raised by the auditors and demonstrate a clear path to sustainable operational profitability, the company's future will remain shrouded in significant uncertainty.