McLeod Russel auditor says September results not fairly prepared

McLeod Russel India Limited’s reviewer concluded that its standalone results for the quarter and six months ended September 30, 2026 were not fairly prepared in all material respects, citing, among other matters, Rs 414.21 crore of doubtful inter-corporate deposits that remained unprovided.

What did McLeod Russel’s auditor conclude about the September results?

McLeod Russel’s independent reviewer, Lodha & Co LLP, issued an adverse conclusion dated November 14, 2026, stating that the standalone financial-results statement for the quarter and six months ended September 30, 2026 had not been prepared fairly in all material respects. The reviewer also said the statement did not fairly disclose the information required under the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.

The conclusion followed a review under Standard on Review Engagement 2410, rather than a full audit. Lodha & Co LLP said a review is based mainly on inquiries and analytical procedures and provides moderate assurance, while being narrower than an audit. It did not express an audit opinion, but concluded that the combined unresolved matters were expected to have a material effect on the September 2026 standalone results.

McLeod Russel’s November 14 filing was a revised board-meeting outcome, replacing an earlier submission to correct what the company described as a clerical or typographical error. The company said the correction did not affect financial figures, profitability or the board’s decision, while the adverse conclusion in the attached review report remained based on the September 30, 2026 statement.

Why are the inter-corporate deposits central to the adverse conclusion?

The largest quantified matter is Rs 2,860.50 crore of inter-corporate deposits, including interest accrued until March 31, 2019, advanced to promoter-group and certain other entities. The reviewer said the deposits were doubtful of recovery and that the recoverability position was prejudicial to McLeod Russel’s interests.

McLeod Russel had recognised provisions of Rs 2,446.29 crore in earlier years, leaving Rs 414.21 crore unprovided at September 30, 2026. The reviewer said that, without determining the shortfall and making a provision against that balance, profit for the period was overstated to that extent. Management had not ascertained or recognised the impact in the September results.

The review report also carried forward concerns reported by the predecessor auditor for the year ended March 31, 2019. These included whether certain promoter companies could in substance be related parties, whether some deposits were book entries, and an advance of Rs 14 crore to a body corporate that was subsequently fully provided for. The matters remained under examination by regulatory and judicial authorities as of November 14, 2026, with no final outcome disclosed.

Which other accounting matters did the reviewer identify?

The reviewer said McLeod Russel had not recognised interest on loans, inter-corporate deposits and other amounts taken by the company, causing period profit to be overstated by the amount set out in Note 9(a). It also said that the amount to be converted into equity share capital, related interest and consequential disclosures could not be determined because relevant terms for loans, advances and liabilities were unavailable.

Penal or compound interest and other adjustments on borrowings from a bank and inter-corporate deposits had not been recognised, according to the report. Amounts payable to the lender bank and other parties were subject to confirmation and reconciliation, and the filing did not quantify the resulting adjustment. The reviewer separately cited unreconciled debit and credit balances, including borrowings and interest, whose financial impact was not ascertainable at September 30, 2026.

Other cited matters included undetermined fair values and possible impairment of property, plant and equipment, intangible assets under development, capital work in progress and investment in a subsidiary. The review also identified unquantified lease-rent liabilities, unreconciled statutory liabilities, uncertainty over deferred-tax assets recognised in earlier periods, and the unassessed accounting impact of the labour code notified by the Government of India on November 21, 2025.

What does McLeod Russel’s September balance sheet show?

McLeod Russel reported total assets of Rs 2,257.25 crore at September 30, 2026, compared with Rs 2,050.28 crore at March 31, 2026. Current assets rose to Rs 575.99 crore from Rs 235.23 crore, while current liabilities increased to Rs 1,440.66 crore from Rs 1,280.90 crore. Current liabilities therefore exceeded current assets in both reported periods.

Total equity was negative Rs 90.97 crore at September 30, 2026, compared with negative Rs 130.70 crore at March 31, 2026. Non-current loans were Rs 414.21 crore, matching the unprovided balance of doubtful inter-corporate deposits identified in the review report. Because the reviewer could not determine the necessary provision, impairment and reconciliation effects, it concluded that the reported standalone figures were not fairly prepared.

For the September 2026 quarter, McLeod Russel reported profit after tax of Rs 34.48 crore, compared with a loss after tax of Rs 8.68 crore in the June 2026 quarter and profit after tax of Rs 29.19 crore in the September 2025 quarter. The adverse conclusion states that unprovided deposits and other unresolved accounting matters could materially affect reported profit and financial position.

Can McLeod Russel continue as a going concern?

McLeod Russel prepared the September 2026 results on a going-concern basis, but the reviewer drew attention to current liabilities exceeding current assets and to operational losses in earlier periods having significantly affected net worth. It also said loans advanced to promoter-group and certain other entities had mostly been used to support a promoter-group company whose resolution plan was approved by the National Company Law Tribunal, Kolkata, and had virtually become non-recoverable.

The filing says borrowings other than those from one bank have been restructured to a sustainable repayment level over time. Repayment is expected to depend on promoter contribution, asset monetisation and operational cash flows under McLeod Russel’s projections. Employees’, statutory and other liabilities, including liabilities for which Employees’ Provident Fund authorities had raised demands, have also been restructured for payment over time.

McLeod Russel’s ability to continue as a going concern depends on fulfilling conditions precedent to the restructured borrowings and securing approval for a debt-settlement proposal pending with the lender bank. The reviewer said the assumption also requires sufficient resources from asset monetisation and future operating cash flow. The filing refers to a memorandum of understanding with buyers of tea-estate assets and says accounting adjustments for sales of specified tea-estate assets will be made when the transactions conclude in a subsequent period.

Conclusion

The adverse conclusion means Lodha & Co LLP found that unresolved matters, led by Rs 414.21 crore of unprovided doubtful deposits, could materially alter McLeod Russel’s reported profit, assets, liabilities and disclosures for the period ended September 30, 2026. The conclusion also covers unrecognised interest, asset valuation and impairment, deferred-tax assets, statutory and lease liabilities, and unreconciled balances.

The disclosed matters to watch are implementation of borrowing restructurings and their conditions precedent, the lender-bank debt-settlement proposal, and completion of specified tea-estate asset transactions. McLeod Russel also needs to determine the deposit shortfall, reconcile lender and other balances, and assess the accounting effect of the November 21, 2025 labour-code notification.