SEPC Q2 pre-tax profit hits Rs 36.81 crore despite income fall

SEPC Limited (SEPC) reported consolidated pre-tax profit of Rs 36.8098 crore for the quarter ended September 30, 2026, compared with Rs 10.7982 crore a year earlier, despite total income falling 8% to Rs 232.0205 crore. Lower expenses drove the increase, but a Rs 95.35 crore deferred-tax charge produced a Rs 58.5402 crore loss after tax.

What drove SEPC's Q2 pre-tax profit?

SEPC's September 2026 pre-tax profit increased because total expenses fell faster than total income. Total income declined to Rs 232.0205 crore from Rs 251.0248 crore in the September 2025 quarter, while total expenses decreased to Rs 195.2107 crore from Rs 240.2266 crore. Profit before exceptional items and tax consequently rose to Rs 36.8098 crore from Rs 10.7982 crore, with no exceptional item reported in either quarter.

SEPC's cost of materials, erection, construction and operation expenses fell by Rs 21.0902 crore year on year to Rs 174.5909 crore. Other expenses declined by Rs 17.3171 crore to Rs 6.4854 crore, employee-benefit expense decreased by Rs 3.5287 crore to Rs 3.8312 crore, and finance costs fell to Rs 9.0314 crore from Rs 11.9435 crore. These reductions exceeded the Rs 19.0043 crore fall in total income.

How did SEPC's income compare with recent periods?

SEPC's September-quarter total income declined both year on year and sequentially, while pre-tax profit increased against both comparison periods. Total income of Rs 232.0205 crore was Rs 19.0043 crore below the September 2025 level and Rs 50.4591 crore below Rs 282.4796 crore in the June 2026 quarter. Revenue from operations fell to Rs 230.7735 crore from Rs 237.4184 crore a year earlier.

The fall in total income exceeded the decline in revenue from operations because other income dropped to Rs 1.247 crore from Rs 13.6064 crore. Against the June 2026 quarter, pre-tax profit rose by Rs 23.6408 crore from Rs 13.169 crore. For the half year ended September 30, 2026, total income increased to Rs 514.5001 crore from Rs 454.8193 crore, and pre-tax profit rose to Rs 49.9788 crore from Rs 29.8454 crore.

SEPC also disclosed that it completed and billed a one-time AED 13.50 million order from Avenir International Engineers & Consultants LLC during the September 2026 quarter. The order covered design and drawing services in the oil and gas sector, and the resulting revenue was recognised as other operating income. The filing does not separately quantify the rupee revenue from that order.

Why did SEPC report a Q2 loss after tax?

SEPC reported a September-quarter loss after tax because deferred-tax expense of Rs 95.35 crore exceeded its Rs 36.8098 crore pre-tax profit. The resulting consolidated loss after tax was Rs 58.5402 crore, compared with a Rs 8.2982 crore profit after tax in the corresponding 2025 quarter. Basic and diluted earnings per share were both a loss of Rs 0.30, against earnings of Rs 0.04 a year earlier.

For the half year ended September 30, 2026, deferred-tax expense totalled Rs 119.5699 crore, compared with Rs 5 crore in the previous year's first half. SEPC said it had prudently written off Rs 119.5699 crore of deferred tax asset, including Rs 24.2199 crore in the June quarter, relating to tax assets due to expire by the end of the financial year. SEPC described this as a non-cash accounting adjustment with no cash-flow, liquidity or debt-servicing impact.

The half-year tax charge resulted in a Rs 69.5911 crore consolidated loss after tax despite Rs 49.9788 crore of pre-tax profit. SEPC said it had positive earnings before interest, tax, depreciation and amortisation, or EBITDA, of Rs 73.0404 crore for the half year and positive cash profit. It also reported accumulated losses of Rs 2,124.3876 crore as at September 30, 2026.

How did working capital affect SEPC's operating cash flow?

SEPC used Rs 47.4903 crore in operating activities during the half year ended September 30, 2026, as working-capital movements outweighed Rs 66.2506 crore of operating profit before working-capital changes. The operating cash outflow narrowed from Rs 148.0349 crore in the corresponding 2025 half year. The comparison shows that cash consumption reduced even as half-year pre-tax profit rose from Rs 29.8454 crore.

Trade receivables increased by Rs 369.993 crore and contract assets increased by Rs 153.6094 crore during the half year, making them the largest disclosed uses of operating cash. An increase of Rs 411.813 crore in trade payables partly offset those movements, alongside a Rs 15.1004 crore decrease in other financial assets. Cash used in operations was Rs 51.62 crore before a Rs 4.1297 crore net tax refund.

Financing activities generated Rs 49.2095 crore in the half year, including Rs 70.2046 crore of net proceeds from short-term borrowings. SEPC also received promoter financial support with a face value of Rs 220.3226 crore, carrying interest of 0.1% a year and repayable in December 2035. Cash and cash equivalents ended September 30, 2026 at Rs 37.5228 crore, compared with Rs 18.3971 crore a year earlier.

What did SEPC's auditor qualify in the results?

SEPC's auditor issued a qualified conclusion because it lacked sufficient appropriate evidence for certain deferred-tax and overdue project-balance assessments. The auditor could not comment on adjustments, if any, to Rs 91.6342 crore of deferred tax assets that management expects to utilise against future taxable profits. The total net deferred tax asset on the consolidated balance sheet was Rs 264.6911 crore at September 30, 2026, down from Rs 384.261 crore at March 31, 2026.

The qualified conclusion also covered overdue non-current contract assets of Rs 90.3798 crore, net of Rs 10.3637 crore of provisions, and overdue non-current trade receivables of Rs 58.4492 crore, net of Rs 5.3877 crore of provisions. The auditor said the balances related to projects stalled by regulatory-approval delays and disputes, and that it could not corroborate management's assessment of recoverability. The auditor noted that these matters had also led to qualifications in earlier reports.

SEPC said one customer connected with the affected projects is undergoing liquidation, but management is confident of recovery based on the realisability of that customer's assets and ongoing customer negotiations. Management also said its remaining Rs 91.6342 crore deferred tax asset can be utilised before expiry, citing the potential order book, project pipeline and future business plans. These are management assessments, while the auditor's qualified conclusion remains in place for the September 2026 results.

Conclusion

SEPC's September 2026 quarter combined higher pre-tax profit with lower income because expenses fell by more than revenue, lifting pre-tax profit to Rs 36.8098 crore. The reported loss after tax of Rs 58.5402 crore instead reflected the deferred-tax charge, while working-capital absorption left the half year with a Rs 47.4903 crore operating cash outflow and the auditor retained qualifications on tax assets and project balances.

The next disclosed corporate development is SEPC's proposed acquisition of 90% of Avenir International Engineers and Consultants LLC, Abu Dhabi, through a share-swap arrangement. Shareholders approved the proposal on August 5, 2026, and stock-exchange approval was received on November 6, 2026; SEPC said lender and other applicable regulatory approvals remain required.