DCM Financial Services' loss understated by Rs 1.4288 crore

DCM Financial Services Limited’s loss for the quarter ended September 30, 2026 was understated by approximately Rs 1.4288 crore because interest on debentures, bills payable and fixed deposits was not provided, its statutory auditor said. DCM Financial Services reported a loss after tax of Rs 22.58 lakh for the quarter.

Why was DCM Financial Services’ September-quarter loss understated?

DCM Financial Services’ September-quarter loss was understated because it did not provide approximately Rs 1.4288 crore of interest, according to V Sahai Tripathi & Co’s limited-review report dated November 2, 2026. The identified amount includes approximately Rs 40.40 lakh of interest on 19.5% debentures, calculated at 10% under the offer letter, and approximately Rs 1.0248 crore on bills payable and fixed deposits.

The standalone statement reported a Rs 22.58 lakh loss after tax for the quarter ended September 30, 2026, compared with losses of Rs 18.67 lakh in the quarter ended June 30, 2026 and Rs 38.58 lakh in the quarter ended September 30, 2025. The reported loss therefore widened by Rs 3.91 lakh sequentially but narrowed by Rs 16.00 lakh from a year earlier. The auditor specifically said the September-quarter loss was understated by Rs 1.4288 crore to the extent of the omitted interest.

Adding the auditor’s identified interest to the reported loss produces an arithmetic loss of Rs 1.6546 crore. This is not a revised result issued by DCM Financial Services, but an illustration of the stated effect of the non-provision. The reported finance cost for the quarter was Rs 2,000, while total expenses were Rs 38.31 lakh and total income was Rs 17.48 lakh.

The review was conducted under Standard on Review Engagement 2410, under which the auditor performs inquiries and analytical procedures to obtain moderate assurance rather than conducting a full audit. V Sahai Tripathi & Co said that, subject to the qualifications and consequential effects not considered by DCM Financial Services, nothing had come to its attention indicating that the statement did not make required disclosures or contained a material misstatement.

What older interest liability did the auditor identify?

DCM Financial Services also had Rs 16.83 crore of unprovided interest under the payment schedule developed through the One Man Committee process. The review report says Rs 2.35 crore was payable to debenture holders and Rs 14.48 crore to fixed depositors under Phase 2 of the schedule that the Delhi High Court accepted on August 10, 2017.

The committee had presently waived further payments of interest to fixed depositors, debenture holders and other lenders, according to the report. If a surplus remains after the complete liquidation of properties and investments and payments to stakeholder creditors, further interest will be decided. The report states that stakeholder creditors covered by the scheme consented to it.

The auditor said that if the Rs 16.83 crore interest had been provided in the financial statements for the year ended March 31, 2018, profit before tax would have been lower by Rs 16.83 crore and profit after tax lower by Rs 13.40 crore. It added that cumulative net loss and current liabilities at March 31, 2026 would have been higher by Rs 13.40 crore.

During the year ended March 31, 2026, DCM Financial Services paid Rs 7.35 lakh of this interest, followed by Rs 45,000 in the six months ended September 30, 2026. The auditor said these payments were recorded as finance cost in the respective periods instead of being classified and disclosed as prior-period items under Indian Accounting Standard 8, Accounting Policies, Changes in Accounting Estimates and Errors.

What did the review say about borrowings and security?

DCM Financial Services had not created a debenture redemption reserve of Rs 20.1498 crore for B-series debentures because of insufficient profits, the auditor said. The stated reserve amount matches the amount of the B-series debentures referred to in the review, and is separate from the Rs 1.4288 crore of interest not provided for the September 2026 quarter.

The auditor also said the value of assets charged as security in favour of banks, debenture holders and financial institutions may have depleted over time, but DCM Financial Services had not ascertained the extent. Any resulting shortfall would mean the related liability was unsecured to that extent, although it was presented as secured in the financial statements.

Current borrowings stood at Rs 67.1999 crore at September 30, 2026, down Rs 2.46 lakh from Rs 67.2245 crore at March 31, 2026. Non-current borrowings were unchanged at Rs 2.077 crore. Total assets declined by Rs 38.49 lakh to Rs 19.7239 crore over the six-month period, while other equity became more negative at Rs 73.6794 crore from negative Rs 73.2659 crore.

The balance sheet included Rs 10.4476 crore of non-current assets held for sale at both September 30, 2026 and March 31, 2026. DCM Financial Services said it had initiated sales of certain properties under the One Man Committee’s property-sale scheme, but final approval and confirmation by the Delhi High Court remained necessary.

Which balance and legal issues remain unresolved?

DCM Financial Services had not received balance confirmations for security deposits, trade receivables, certain bank and fixed-deposit balances, rent receivables, advances, borrowings, related-party payables and other receivables and payables, the auditor said. Without confirmations and reconciliations, the auditor said it was not feasible to determine the financial effect and the balances recorded in the books could differ.

The review further said that debts potentially time-barred under the Limitation Act had not been separately identified, written off or provided for. Unlike the Rs 1.4288 crore interest issue for the September 2026 quarter, the auditor did not quantify the possible effect of these unconfirmed balances or time-barred debts.

A dispute with NBCC Ltd. concerns a Rs 2.8829 crore claim linked to an office premise DCM Financial Services bought in 1995. This included Rs 2.2928 crore for the difference between super area and provisional area. In an award issued during the year ended March 31, 2021, NBCC was awarded Rs 41.06 lakh against its Rs 4.3495 crore claim, while DCM Financial Services was awarded Rs 78.97 lakh against its Rs 32.695 crore counterclaim.

Interest at 10% is payable by both parties on their respective awarded amounts, according to the report. NBCC filed objections to the award in the Delhi High Court in December 2020. DCM Financial Services also filed objections, which had not been listed at the time described in the November 2, 2026 review report.

Conclusion

The limited-review report identifies a quantified Rs 1.4288 crore omission from DCM Financial Services’ September 2026 loss, substantially larger than the Rs 22.58 lakh loss it reported. It also records Rs 16.83 crore of older unprovided interest, a Rs 20.1498 crore uncreated debenture redemption reserve, potentially depleted security and balances that lack external confirmation.

The next disclosed event to watch is the proposed sale of properties carried at Rs 10.4476 crore, which requires final Delhi High Court approval and confirmation under the One Man Committee scheme. The report also leaves open a decision on further interest if liquidation produces a surplus after stakeholder creditors are paid, while the NBCC award objections remain unresolved.