Kothari Industrial auditors cannot verify Rs 94.33 crore debt

Kothari Industrial Corporation Limited’s auditors could not verify Rs 94.33 crore of unsecured borrowings for the quarter and six months ended 30 September 2026 because external balance confirmations were not provided. The limited-review reports also cited Rs 1.81 crore of unconfirmed promoter balances, unresolved prior-year reconciliations and an unassessed inventory valuation risk.

What could Kothari Industrial’s auditors not verify?

Kothari Industrial’s auditors could not ascertain the effect on profit or loss from Rs 94.33 crore of unsecured borrowings and Rs 1.81 crore of promoter balances for the period ended 30 September 2026. Ray & Ray Chartered Accountants said external confirmations for those balances had not been supplied for verification in both the standalone and consolidated limited-review reports dated 14 November 2026.

The two balances total Rs 96.14 crore, but the reports do not say that either recorded amount is incorrect. Instead, the auditors said the lack of third-party confirmations prevented them from determining any consequential impact on the interim profit or loss. Their standalone report stated that nothing had come to their attention to suggest a disclosure failure or material misstatement, except for the possible impact of the listed matters.

Ray & Ray performed its work under Standard on Review Engagements 2410 for the September 2026 results. The firm explained that a limited review relies mainly on enquiries and analytical procedures and is narrower than an audit under Standards on Auditing. It therefore does not provide assurance that all significant matters would be identified, and the firm did not express an audit opinion.

Which previous-period reconciliations remain unresolved at Kothari Industrial?

Kothari Industrial had not resolved prior-year reconciliations for Goods and Services Tax input tax credit, salary payable and related statutory deductions by 30 September 2026. Management had reconciled the corresponding balances for the six months ended 30 September 2026, but the auditors said they remained unable to determine the possible effects of the earlier unreconciled balances.

The Goods and Services Tax, or GST, issue had also appeared in the audit report for the year ended 31 March 2026 and the limited-review report for the quarter ended 30 June 2026. GST input tax credit balances in the books from prior financial years had not been reconciled with GST returns and portal records. The filing does not quantify a possible adjustment or state that one will be required.

A separate matter concerns salary payable and deductions including Provident Fund, Employees’ State Insurance and professional tax for the previous financial year. While management completed reconciliations for the half-year to 30 September 2026, it had not provided the earlier-year reconciliation. The auditors said this meant they could not determine the historical balances’ impact, if any, on the financial results.

Why is inventory older than 365 days an audit issue?

Kothari Industrial had an inventory-ageing system but made no provision for inventory held for more than 365 days as at 30 September 2026. Ray & Ray said it could not verify whether that inventory was carried at cost or net realisable value, or NRV, as required by Indian Accounting Standard 2, known as Ind AS 2.

The auditors said the interim statements reflected inventory at the values appearing in the books of account. They did not disclose the value of inventory older than 365 days, the amount of any potential provision or a possible effect on profit. The filing therefore identifies a valuation uncertainty without establishing that an impairment has occurred.

The same inventory limitation appeared in the standalone and consolidated review reports for the September 2026 period. In both cases, the auditor’s concern was the absence of a provision assessment for aged stock, not an auditor-determined adjustment. That distinction leaves the potential financial-statement effect unquantified in the filing.

How do Kothari Industrial’s standalone and consolidated findings compare?

Kothari Industrial’s standalone and consolidated reports carry the same core limitations at 30 September 2026: the Rs 94.33 crore unsecured borrowings, Rs 1.81 crore promoter balances, prior-year GST and payroll reconciliations, and inventory aged beyond 365 days without a provision. Both reports also refer to proceedings over certain Coonoor land plots, for which an interim stay has been passed by the Madras High Court.

The consolidated report adds matters concerning group financial information. It includes the Group’s Rs 26.84 crore share of net loss after tax for the quarter ended 30 September 2026 from an associate and its subsidiaries under the equity method. The auditors did not review that information, which management certified and furnished, and said their conclusion was not modified in respect of the matter.

The consolidated results also included Kothari Industrial IUAD Design Private Limited, whose half-year results showed nil revenue, Rs 0.29 lakh of expenses and a Rs 42.40 lakh net loss after tax to 30 September 2026. The subsidiary’s information was management-certified and not reviewed by Ray & Ray, which said it was not material to the Group. The parent’s Rs 2.14 crore unpaid share subscription to that subsidiary was disclosed as a current financial liability.

Conclusion

The September 2026 limited reviews identify evidence and measurement limitations rather than quantified restatements at Kothari Industrial. The largest item is the Rs 94.33 crore of unsecured borrowings lacking external confirmation, while the inventory issue and unresolved historical reconciliations leave further potential effects on the financial statements unmeasured.

The disclosed matters to watch are whether Kothari Industrial provides external confirmations for the Rs 96.14 crore of borrowings and promoter balances, completes prior-year GST and payroll reconciliations, and assesses inventory older than 365 days for a provision. The Coonoor land writ petition also remains unresolved, although the filing says an interim stay order has been passed.