Rays of Belief FY25 profit relied on Rs 5.533 crore tax credit

Rays of Belief Limited reported FY25 profit of Rs 5.881 crore, but Rs 5.533 crore, or about 94%, came from a deferred-tax credit. Rays of Belief recorded only Rs 0.348 crore of standalone profit before tax for the year ended March 31, 2025, after management recognised expected future tax benefits from earlier losses and unabsorbed depreciation.

How did Rays of Belief's FY25 tax credit create reported profit?

Rays of Belief's FY25 reported profit was substantially higher than its pre-tax profit because the company booked a Rs 5.533 crore deferred-tax credit. Revenue from operations rose to Rs 36.419 crore in FY25 from Rs 30.608 crore in FY24, while profit before tax increased to Rs 0.348 crore from Rs 0.100 crore. With no current-tax expense in FY25, the deferred-tax credit lifted profit for the year to Rs 5.881 crore.

A deferred-tax credit is an accounting tax benefit rather than cash received from tax authorities during the period. It arises when an entity recognises that deductible temporary differences, carried-forward tax losses or unabsorbed depreciation can reduce tax payable against future taxable income. In FY25, the Rs 5.533 crore credit was about 15.9 times Rays of Belief's Rs 0.348 crore profit before tax, explaining the gap between pre-tax and reported profit.

FY25 was not the first year in which tax accounting raised reported profit. FY24 profit of Rs 0.853 crore included a Rs 0.753 crore deferred-tax credit against profit before tax of Rs 0.100 crore. What changed in FY25 was the scale: the credit rose by Rs 4.780 crore, while profit before tax increased by Rs 0.248 crore, showing that the larger net profit mainly reflected a reassessment of recoverability.

Why did Rays of Belief recognise the deferred-tax asset in FY25?

Rays of Belief recognised a deferred-tax asset in FY25 after management concluded that future taxable profits were likely to be sufficient to use earlier tax losses and unabsorbed depreciation. The company had not recognised deferred-tax assets on these items in FY23 and FY24 because it considered future taxable income insufficiently certain following business losses in FY21, FY22 and FY23.

The stated accounting policy requires deferred-tax assets to be recognised only when sufficient future taxable income is expected. Where an entity has unabsorbed depreciation or carried-forward tax losses, the policy requires virtual certainty supported by convincing evidence that the assets can be realised against future taxable profits. The FY25 credit therefore depends on taxable-income forecasts rather than simply on the existence of historical losses.

Management cited board-approved business plans and financial projections in its FY25 assessment. The disclosed support included domestic expansion and the introduction of a Business Support Services vertical under export services, which management expected to produce economies of scale. Rays of Belief also characterised earlier losses as principally arising from non-recurring scale-up costs and pandemic-related closures.

The recognition retains forecast risk. Rays of Belief stated that deferred-tax-asset recoverability is sensitive to future revenue growth and operating margins, and that a reasonably possible negative change in those assumptions in the next financial year could materially reduce the recognised asset. A reduction would be recorded as deferred-tax expense and would lower profit in the period of reassessment.

What was inside Rays of Belief's FY25 deferred-tax asset?

Rays of Belief reported net deferred-tax assets of Rs 6.308 crore at March 31, 2025, compared with Rs 0.762 crore at March 31, 2024. The Rs 5.533 crore deferred-tax credit recognised in the FY25 statement of profit and loss was the main reason for the year-on-year increase in the balance-sheet asset.

The largest component at March 31, 2025 was Rs 5.414 crore relating to carried-forward losses. Deferred-tax assets from unabsorbed depreciation were Rs 0.272 crore. Together, these loss-related components totalled Rs 5.686 crore, representing about 90% of the Rs 6.308 crore net deferred-tax asset, making the asset primarily dependent on the future use of historical tax losses.

The remaining FY25 deferred-tax balances related to lease liabilities, employee-benefit provisions, property and equipment, expected credit losses and other timing differences. Deferred-tax assets and liabilities can be offset where they concern the same taxable entity and tax authority and a legally enforceable right of set-off exists. The Rs 6.308 crore balance is therefore a net asset, not an indication of Rs 6.308 crore of cash tax recovery.

What does FY26 say about Rays of Belief's taxable-profit forecasts?

Rays of Belief reported Rs 6.903 crore of profit before tax for the year ended March 31, 2026, compared with Rs 0.348 crore in FY25, but the periods are not directly comparable. The FY26 information is consolidated after Rays of Belief acquired 100% of Mom's Belief US Inc. on June 23, 2025; Mom's Belief US Inc. in turn holds 100% of Allergy & Immunology LLC. FY25 and FY24 were standalone periods.

FY26 consolidated revenue from operations was Rs 81.662 crore and profit for the year was Rs 4.959 crore. Unlike FY25, Rays of Belief recorded current tax of Rs 1.174 crore and deferred-tax expense of Rs 0.770 crore. Deferred-tax expense reduces reported profit, in contrast to the FY25 credit, and reflects changes in the measurement or use of deferred-tax assets and liabilities.

Net deferred-tax assets fell to Rs 5.505 crore at March 31, 2026 from Rs 6.308 crore at March 31, 2025, while a Rs 0.019 crore deferred-tax liability was also reported. The deferred-tax asset related to carried-forward losses declined to Rs 4.327 crore from Rs 5.414 crore, and the component relating to unabsorbed depreciation fell to Rs 0.227 crore from Rs 0.272 crore. The disclosures do not specify how much of this movement resulted from tax-return utilisation rather than revised temporary differences or estimates.

Management identified the FY26 Rs 6.903 crore profit before tax and the operationalisation of three new US centres as evidence supporting future taxable-profit forecasts. However, the addition of the US business after June 2025 means the FY26 consolidated result cannot serve as a like-for-like standalone comparison with FY25. The revised tax-asset assessment must still be supported by future taxable income in the relevant taxable entities.

Conclusion

Rays of Belief's FY25 profit of Rs 5.881 crore was largely created by a Rs 5.533 crore deferred-tax credit, while standalone profit before tax was Rs 0.348 crore. The accounting recognition reflected management's revised forecast that future taxable profits could absorb historical losses and unabsorbed depreciation, rather than a matching increase in FY25 cash earnings.

The next disclosed measure to watch is whether taxable profits support the Rs 5.505 crore net deferred-tax asset at March 31, 2026. Rays of Belief's disclosed plans include domestic expansion, Business Support Services exports and three new US centres, while its financial statements state that weaker revenue growth or operating margins could materially reduce the asset.