H. M. Electro Mech Limited records block Rs 37.49 crore verification

H. M. Electro Mech Limited’s reviewer said it could not verify the accuracy of Rs 37.49 crore of inventory at September 30, 2026 because detailed records, including project-wise costs incurred and costs yet to be incurred, were not maintained. The November 5, 2026 limited review report included the matter without modifying its conclusion.

Why could H. M. Electro Mech not verify its inventory value?

H. M. Electro Mech’s reviewer could not verify the Rs 37.49 crore inventory balance because the company did not maintain detailed inventory records and project-wise cost information. In its limited review report dated November 5, 2026, S V J K and Associates said the unavailable information included costs incurred to date and costs yet to be incurred on projects.

The reviewer said it was therefore unable to verify the accuracy of the inventory value reflected in the financial results or assess its potential impact on those results for the six months ended September 30, 2026. The observation appeared under an “Emphasis of Matter” heading and did not quantify a possible overstatement, understatement, write-down or restatement.

The Rs 37.49 crore amount is the inventory balance in H. M. Electro Mech’s unaudited balance sheet at September 30, 2026. The filing identifies a documentation and valuation-verification issue, rather than a disclosed physical shortage or a confirmed adjustment to the reported inventory balance.

How did H. M. Electro Mech inventory change in the half year?

H. M. Electro Mech’s reported inventory increased by Rs 12.97 crore to Rs 37.49 crore at September 30, 2026, from Rs 24.53 crore at March 31, 2026. Its cash-flow statement records a Rs 12.97 crore increase in inventories during the six-month period, making inventory a use of operating cash.

Trade receivables declined by Rs 23.26 crore to Rs 42.04 crore over the same six months, while other current assets rose by Rs 5.41 crore to Rs 11.94 crore. Total current assets consequently declined to Rs 101.95 crore at September 30, 2026 from Rs 103.95 crore at March 31, 2026.

Short-term borrowings increased to Rs 20.28 crore at September 30, 2026 from Rs 9.24 crore at March 31, 2026, while long-term borrowings declined to Rs 4.59 crore from Rs 5.94 crore. The filing does not identify inventory categories, individual projects, suppliers or contract positions behind the Rs 12.97 crore inventory movement.

What do H. M. Electro Mech’s September half-year results show?

H. M. Electro Mech reported revenue from operations of Rs 31.73 crore for the six months ended September 30, 2026, down from Rs 33.78 crore in the corresponding prior-year period. Profit after tax rose to Rs 2.48 crore from Rs 2.37 crore, while profit before tax increased to Rs 3.36 crore from Rs 3.31 crore.

Total expenses fell to Rs 28.45 crore from Rs 30.59 crore in the six months ended September 30, 2025. Cost of materials consumed decreased to Rs 13.17 crore from Rs 18.54 crore, whereas project and other expenses increased to Rs 1.85 crore from Rs 1.39 crore.

Operating profit before working-capital changes was Rs 4.91 crore in the latest half year. However, the Rs 12.97 crore inventory increase, a Rs 5.42 crore increase in loans, advances and other assets, and a Rs 16.44 crore reduction in trade payables and other liabilities resulted in negative cash generated from operations of Rs 6.65 crore.

After Rs 15 lakh of direct taxes paid, H. M. Electro Mech reported net cash used in operating activities of Rs 6.80 crore for the six months ended September 30, 2026. Net cash from financing activities was Rs 8.45 crore, including a Rs 11.04 crore increase in short-term borrowings, and closing cash and cash equivalents stood at Rs 10.44 crore.

Does H. M. Electro Mech’s review report modify the financial results?

No, the limited review report does not modify its conclusion on H. M. Electro Mech’s unaudited results for the six months ended September 30, 2026. S V J K and Associates expressly stated that its conclusion was not modified in respect of the inventory valuation matter.

The reviewer also said that nothing had come to its attention that caused it to believe the financial statement did not disclose information required under Regulation 33 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. That conclusion followed a limited review, not an audit, of the September 2026 financial information.

The report explains that a limited review consists primarily of inquiries of company personnel and analytical procedures applied to financial data, providing less assurance than an audit. It states that the reviewer did not perform an audit and therefore did not express an audit opinion for the September 30, 2026 half-year results.

H. M. Electro Mech’s board approved the unaudited results, balance sheet and cash-flow statement at its November 5, 2026 meeting, held from 3:30 p.m. to 4:10 p.m. The announcement does not provide a separate management explanation for the absent inventory records, a remediation timetable, or a revised inventory estimate.

Conclusion

The filing combines a Rs 37.49 crore inventory balance with a reviewer’s statement that the detailed and project-wise records needed to verify its valuation were unavailable. Inventory increased by Rs 12.97 crore in the September 2026 half year, while revenue declined to Rs 31.73 crore, profit after tax was Rs 2.48 crore, and operating cash flow was negative Rs 6.80 crore.

The unresolved matter is whether H. M. Electro Mech will provide the detailed inventory and project-cost records that its reviewer said were missing at September 30, 2026. The filing gives no timetable for such records, no quantified potential effect on the results, and no stated expectation of an adjustment to the Rs 37.49 crore inventory balance.