Phychem’s FY25 Restatement Reduced Profit by Rs 50.41 Lakh

Phychem’s IPO financial restatement reduced FY25 profit after tax to Rs 2.8417 crore from Rs 3.3458 crore, a Rs 50.41 lakh reduction. The largest individual entry was an Rs 83.73 lakh decrease in subsidy income, partly offset by an Rs 76.02 lakh adjustment to the income-tax provision.

How much did Phychem’s FY25 restatement change profit?

Phychem’s FY25 restatement reduced reported profit after tax by Rs 50.41 lakh, while FY26 profit was unchanged and FY24 profit declined by Rs 2.85 lakh. Annexure V reconciles audited accounts with restated accounts prepared under the Securities and Exchange Board of India’s Issue of Capital and Disclosure Requirements, or ICDR, regulations.

Phychem’s FY25 restated profit was Rs 1.2473 crore below FY26 restated profit of Rs 4.089 crore. Before the FY25 adjustment, the audited profit gap between FY25 and FY26 was Rs 74.32 lakh; on the restated figures, the gap was Rs 1.2473 crore. The FY25 adjustment therefore changed the comparison between the two years by Rs 50.41 lakh.

Phychem’s restatement did not change the FY26 equity figure of Rs 13.7883 crore or the FY25 figure of Rs 9.6993 crore. FY24 equity increased to Rs 6.8576 crore from Rs 6.5436 crore through Rs 31.40 lakh of cumulative adjustments, consisting of Rs 18.22 lakh in the profit and loss account and Rs 13.18 lakh in opening reserves as of April 1, 2023.

Which entries caused Phychem’s FY25 profit reduction?

Phychem’s Rs 50.41 lakh FY25 reduction came from multiple entries, led by the Rs 83.73 lakh reduction for the difference in subsidy income. Other negative items were Rs 18.98 lakh of prior-period items, Rs 11.71 lakh of foreign-exchange fluctuation adjustment, Rs 8.95 lakh related to deferred-tax assets, Rs 6.91 lakh for export incentives, Rs 2.01 lakh for depreciation and amortisation, and Rs 0.76 lakh of prepaid-expense creation.

The negative entries were partly offset by an Rs 76.02 lakh income-tax adjustment, an Rs 4.97 lakh goods and services tax, or GST, demand adjustment, and Rs 1.64 lakh for accrued interest on borrowings. The provision for gratuity had no net FY25 effect in the reconciliation. The restatement thus covered income recognition, tax, foreign-exchange treatment, expense timing and borrowing costs rather than subsidy income alone.

Phychem said it identified errors in capitalisation dates, depreciation rates and calculation of profit or loss on sales of property, plant and equipment, or PPE. It recalculated depreciation in the restated statement of profit and loss. Phychem also reassigned prior-period expenses to the year to which the expenses related, rather than retaining the prior accounting treatment.

Why did subsidy income lower Phychem’s FY25 restated profit?

Phychem’s subsidy-income adjustment lowered FY25 profit by Rs 83.73 lakh because subsidy income had been recognised on receipt basis and was restated on an accrual basis under the company’s accounting policy. Receipt-basis recognition records income when it is received, while accrual accounting assigns income to the relevant accounting period. The disclosure describes an accounting-timing adjustment, not a stated cash outflow of Rs 83.73 lakh.

The subsidy-income line moved in the opposite direction in FY24, adding Rs 7.78 lakh to that year’s reconciled profit. The contrast between the FY24 addition and FY25 reduction shows that the restatement shifted the timing of income recognition across the reported periods. Comparability of future subsidy income will depend on continued use of the stated accrual-basis policy.

Phychem also recorded an Rs 6.91 lakh FY25 reduction for accounting of export incentives. The supplied explanation does not provide a separate narrative for the export-incentive entry. Together, the Rs 90.64 lakh reduction from subsidy income and export incentives exceeded the Rs 50.41 lakh net FY25 profit reduction because income-tax and other positive adjustments offset part of their effect.

How did tax and accrual accounting affect Phychem’s FY25 figures?

Phychem’s Rs 76.02 lakh FY25 income-tax adjustment was the largest offsetting item because the company recalculated income tax on restated profit at the prevailing tax rates. Phychem said current and prior-period taxes were charged to the respective periods to which they related on an accrued or provisional basis, with short or excess provisions adjusted in the relevant year.

From FY25, Phychem adopted the option under Section 115BAA of the Income-tax Act, 1961, using an effective corporate tax rate of 25.17%, including surcharge and cess. Minimum Alternate Tax, or MAT, did not apply to Phychem from FY25 under that option. The tax note reports current tax under normal provisions of Rs 1.394 crore for FY26, Rs 93.83 lakh for FY25 and Rs 62.27 lakh for FY24.

Phychem separately recalculated deferred tax for temporary differences involving gratuity, leave encashment, Section 43B disallowances and differences between PPE tax bases and book written-down values. The FY25 reconciliation shows an Rs 8.95 lakh reduction for short or excess deferred-tax assets. Gratuity was moved from cash-basis accounting to actuarial-valuation accounting under Accounting Standard 15 (Revised), Employee Benefits, although the FY25 reconciliation records no net profit effect from that item.

What do Phychem’s restated results show from FY24 to FY26?

Phychem’s restated profit after tax increased from Rs 1.694 crore in FY24 to Rs 2.8417 crore in FY25 and Rs 4.089 crore in FY26, despite the FY25 revision. The accounting-ratios table reports basic and diluted earnings per share of Rs 2.25 in FY24, Rs 3.77 in FY25 and Rs 5.42 in FY26. Those per-share figures are disclosed in the restated IPO financial information.

Earnings before interest, tax, depreciation and amortisation, or EBITDA, increased from Rs 2.7578 crore in FY24 to Rs 4.3687 crore in FY25 and Rs 6.0866 crore in FY26. Return on net worth was 24.70% in FY24, 29.30% in FY25 and 29.66% in FY26. The restated statements therefore retain a rising profit and EBITDA sequence across the three years, while placing FY25 profit on a lower base than the audited accounts had shown.

Phychem reported total debt of Rs 5.9063 crore as of March 31, 2026, comprising Rs 4.5143 crore of short-term debt and Rs 1.392 crore of long-term debt including current maturities. Shareholders’ funds were Rs 13.7883 crore, and the disclosed long-term debt-to-equity and total debt-to-equity ratios were 0.10 and 0.43, respectively. Phychem did not provide post-issue capitalisation because completion of the public issue was pending.

Conclusion

Phychem’s restatement changes the reported FY25 profit base from Rs 3.3458 crore to Rs 2.8417 crore. The Rs 50.41 lakh net reduction resulted mainly from the shift of subsidy-income recognition to accrual accounting, with tax, GST, interest and other accounting entries partly offsetting the subsidy-related decrease.

The next point to watch is Phychem’s application of the disclosed accrual treatments for subsidy income, taxes, interest and expenses in subsequent financial reporting. The post-issue capitalisation figures also remain unresolved in the supplied disclosure because Phychem states that they cannot be determined until the public issue is completed.