EFC (I) review qualified over Rs 76.38 crore unbilled revenue

EFC (I) Limited received a qualified conclusion on its consolidated limited review for the quarter and half year ended September 30, 2026, after auditors could not obtain customer confirmations for Rs 76.38 crore of unbilled revenue and sufficient evidence on Rs 18.95 crore of overdue receivables.

Why did EFC (I) receive a qualified review conclusion?

EFC (I) received a qualified conclusion because Mehra Goel & Co. LLP was awaiting customer confirmations for Rs 76.38 crore of unbilled revenue included in other current assets at September 30, 2026. The amount represents revenue recognised for work performed but not yet billed under contractual milestones, according to the auditor's limited review report dated November 3, 2026.

The qualification also covers Rs 18.95 crore of trade receivables outstanding for more than six months. Within that sum, Rs 8.31 crore had remained outstanding for more than one year. The auditors said the company had not finalised its recoverability assessment, balance confirmations and details of subsequent realisation at the date of the report.

The auditors did not conclude that either balance was misstated. Instead, they said they could not obtain sufficient appropriate review evidence to decide whether the expected credit loss allowance was adequate or whether adjustments to receivables, revenue or related losses were necessary for the September quarter and April-to-September period.

How did EFC (I) recognise the unbilled revenue?

EFC (I) recognised the Rs 76.38 crore contract asset under Indian Accounting Standard 115, or Ind AS 115, using an input method based on cost-to-cost or stage-of-completion measurement. This method records revenue for work performed before invoicing where billing is tied to milestones in the underlying contract.

Management determined the stage of completion using certificates from independent technical experts, who assessed physical progress against the approved scope and cost estimates. Based on executed work, technical certification and contractual terms, management told the auditors that the contract assets were fully recoverable and that no adjustment to recognised revenue was required.

However, EFC (I) was still obtaining confirmation from the customer of work completed as of September 30, 2026. The pending confirmation was the basis of the qualification, despite the technical certificates and management's assessment supporting the recorded stage of completion.

The filing distinguishes the Rs 76.38 crore balance from a normal invoiced receivable. It is unbilled revenue, meaning work had been recognised under Ind AS 115 but the corresponding invoice had not yet been raised because the relevant contractual billing milestone had not been reached or processed.

What did auditors find on EFC (I)'s overdue receivables?

EFC (I)'s auditors could not assess whether the expected credit loss allowance on Rs 18.95 crore of receivables overdue by more than six months was adequate. Expected credit loss is the impairment approach required under Indian Accounting Standard 109, or Ind AS 109, for financial assets including trade receivables.

Of the Rs 18.95 crore balance, Rs 8.31 crore had been outstanding for more than one year at September 30, 2026. The remaining Rs 10.64 crore was overdue by more than six months but was not in the more-than-one-year category, based on the ageing amounts disclosed in the review report.

Management was actively following up with customers to recover the balances, the report said. But the auditors noted that the recoverability assessment, customer balance confirmations and information on collections after the reporting date had not been finalised, preventing a conclusion on whether an additional allowance or other adjustment was required.

The report does not name the customers involved, identify any amount subsequently collected, or quantify a potential additional expected credit loss charge. It therefore leaves unresolved the carrying value of the Rs 18.95 crore balance and the related effect, if any, on loss for the quarter and half year ended September 30, 2026.

Does the qualification apply to all of EFC (I)'s results?

EFC (I)'s qualified conclusion applies to the possible effects of the unbilled-revenue and overdue-receivable matters, rather than stating that all consolidated results were misstated. Except for those possible effects, the auditors said nothing had come to their attention indicating that the results failed to meet applicable disclosure requirements or contained a material misstatement.

The conclusion covers unaudited consolidated results for the quarter ended September 30, 2026 and the six months from April 1, 2026 to September 30, 2026. The review was conducted under Standard on Review Engagements 2410, which uses inquiries and analytical procedures rather than the broader procedures of a statutory audit.

A limited review is substantially narrower in scope than an audit under the Standards on Auditing, according to the report. The auditors therefore did not express an audit opinion and said a review does not provide assurance that every significant matter that could be identified in an audit would be identified.

The auditors also performed procedures required under the Securities and Exchange Board of India Listing Obligations and Disclosure Requirements Regulations. Their qualified conclusion was issued on November 3, 2026, one day after EFC (I)'s board approved the consolidated results on November 2, 2026.

What role did other auditors have in EFC (I)'s review?

EFC (I)'s principal auditors relied on review reports from other auditors for 22 subsidiaries included in the consolidated statement. Before eliminating intercompany transactions and balances, those subsidiaries had total assets of Rs 2,856.7648 crore at September 30, 2026.

The same 22 subsidiaries reported revenue of Rs 167.2177 crore for the September 2026 quarter and Rs 285.2414 crore for the six months ended September 30, 2026, before consolidation adjustments. Their profit after tax was Rs 82.8327 crore for the quarter and Rs 99.0457 crore for the half year.

Those subsidiaries also recorded net cash outflow of Rs 1.61 crore for the six months ended September 30, 2026, before consolidation adjustments. The principal auditors said their conclusion on these subsidiaries' amounts and disclosures was based on the other auditors' reports and the procedures they performed.

The review conclusion was not modified because of reliance on the other auditors. The qualification instead specifically concerns pending customer confirmation for Rs 76.38 crore of contract assets and incomplete evidence supporting the expected credit loss assessment for Rs 18.95 crore of overdue receivables.

Conclusion

EFC (I)'s qualified limited-review conclusion centres on two unresolved evidence matters: Rs 76.38 crore of unbilled revenue awaiting customer confirmation and Rs 18.95 crore of long-overdue receivables awaiting a completed recoverability and credit-loss assessment. The report does not state that an adjustment is certain, but it says the auditors could not determine whether one was required.

The next disclosure to watch is whether EFC (I) receives customer confirmation for the work underpinning the contract asset and finalises balance confirmations, collection evidence and the Ind AS 109 allowance for receivables. Management said it expected work confirmations in due course and was pursuing collections, although the filing gives no completion date for either process.