Sadbhav Infra Q2 FY26: Profit Plummets 45.8% Despite Revenue Growth

Introduction to Q2 FY26 Performance

Sadbhav Infrastructure Project Ltd. has released its financial results for the second quarter of fiscal year 2026, which ended on September 30, 2025. The report presents a mixed financial picture. While the company achieved a notable 21.3% year-over-year (YoY) increase in total income, its net profit experienced a sharp decline of 45.8%. This divergence between revenue growth and profitability highlights underlying challenges related to cost pressures and tax expenses. Furthermore, recent annual reports have brought to light significant qualifications from statutory auditors regarding the valuation of key investments, adding a layer of caution for investors.

Detailed Financial Breakdown

In Q2 FY26, Sadbhav Infrastructure's total income reached ₹206.16 crores, up from ₹170.02 crores in the same quarter of the previous fiscal year. However, on a quarter-over-quarter (QoQ) basis, income saw a slight dip of 3.5% from ₹213.55 crores in Q1 FY26. The company's total expenses for the quarter were ₹171.20 crores, remaining almost flat compared to the ₹171.04 crores reported in Q2 FY25. This stability in expenses suggests a degree of operational control.

Despite the revenue growth and controlled expenses, profit before tax (PBT) fell significantly by 29.0% YoY to ₹34.96 crores. A substantial increase in tax expenses, which surged by 287.6% YoY to ₹9.65 crores, further eroded the bottom line. Consequently, the profit after tax (PAT) for the quarter stood at ₹25.31 crores, a 45.8% drop from the ₹46.72 crores earned in Q2 FY25. This decline in profitability directly impacted shareholder returns, with Earnings Per Share (EPS) falling by 72.2% YoY to ₹0.30.

Quarterly Performance Summary

A History of Volatile Earnings

The company's recent financial history reveals inconsistent profitability. The profit of ₹25.31 crores in the September 2025 quarter follows a period of significant losses. For instance, the company reported a consolidated net loss of ₹86.00 crores in the March 2025 quarter and a loss of ₹3.74 crores in the December 2024 quarter. This volatility makes it challenging to establish a stable earnings trend and may concern investors looking for consistent performance.

Auditor Qualifications Raise Concerns

A critical issue highlighted in the company's financial disclosures is the presence of qualifications in the statutory auditors' report for the financial year ended March 31, 2024. The auditors expressed reservations about the company's impairment assessment of investments, loans, and receivables in several subsidiaries. They noted that the company has not made necessary adjustments to the carrying value of these assets, which aggregate to significant amounts, such as ₹8,040.58 million in one case.

The auditors' opinion suggests a potential overvaluation of these assets on the company's books. The qualifications imply that if these investments are not fully recoverable, the company's financial health could be weaker than reported.

Management's Justification

In response to the auditors' qualifications, Sadbhav Infrastructure's management has maintained that no impairment or adjustment is necessary. The company's board stated that its assessment is based on expected payments arising from claims filed with the National Highways Authority of India (NHAI) and ongoing conciliation processes. Management expressed confidence in the tenability of these claims and the eventual recovery of the invested amounts, thereby justifying the current carrying value of the assets.

Impact on Internal Financial Controls

The auditors also issued a qualified opinion on the company's internal financial controls. They stated that the controls related to evaluating the uncertainty of realizing the carrying value of investments in subsidiaries were not operating effectively. This weakness could potentially lead to material misstatements in the financial statements, further compounding the risks associated with the valuation of these assets.

Corporate Actions and Outlook

Sadbhav Infrastructure continues to adhere to its corporate governance schedule, with regular board meetings to discuss financial results and strategic matters. A meeting of the Board of Directors was scheduled for February 12, 2026. Such meetings are closely watched for any updates on the company's operational performance and its strategy for resolving the issues raised by auditors.

In conclusion, while Sadbhav Infrastructure has demonstrated its ability to grow its top line, its profitability remains under pressure. The unresolved auditor qualifications regarding asset valuation represent a significant risk. The company's future financial stability will largely depend on its ability to improve profit margins and successfully recover the amounts due from its claims with NHAI.