SEPC posts Rs 69.59 crore loss after tax asset write-off

SEPC Limited reported a consolidated loss of Rs 69.59 crore for the half year ended September 30, 2026, after a Rs 119.57 crore non-cash deferred-tax asset write-off exceeded its Rs 49.98 crore profit before tax. The charge reassessed tax assets associated with business losses that were approaching expiry.

Why did SEPC post a first-half loss?

SEPC posted the first-half loss because deferred-tax expense reached Rs 119.57 crore, including Rs 24.22 crore charged in the June 2026 quarter and Rs 95.35 crore in the September 2026 quarter. The company said it wrote off the asset as a prudent measure because deferred-tax assets of Rs 190.24 crore were due to expire by the end of the current financial year.

The company said the charge was a non-cash accounting adjustment and involved no outflow of funds. SEPC said the reassessment concerned the likelihood of generating sufficient taxable profits within the permitted period to use this specific tax-asset tranche; the underlying business losses remain available for carry-forward and set-off, subject to applicable time limits.

The comparison shows total income rose by Rs 59.68 crore and profit before tax increased by Rs 20.13 crore from the prior-year half. Deferred-tax expense, however, increased by Rs 114.57 crore, moving SEPC from a Rs 24.85 crore profit after tax in the half year ended September 30, 2025 to a Rs 69.59 crore loss.

How did SEPC's operations perform before the tax charge?

SEPC's revenue from operations was Rs 504.58 crore for the half year ended September 30, 2026, up from Rs 439.70 crore a year earlier. Other income declined to Rs 9.92 crore from Rs 15.12 crore, leaving total income at Rs 514.50 crore, compared with Rs 454.82 crore in the corresponding period.

Profit before tax rose to Rs 49.98 crore from Rs 29.85 crore as total expenses increased to Rs 464.52 crore from Rs 424.97 crore. Materials, erection, construction and operating expenses rose to Rs 419.89 crore from Rs 353.55 crore, while employee-benefit expense fell to Rs 9.39 crore from Rs 15.48 crore and finance cost decreased to Rs 20.50 crore from Rs 21.43 crore.

The September 2026 quarter included an AED13.50 million one-time order from Avenir International Engineers & Consultants LLC for oil and gas design and drawing services. SEPC said it executed and billed that order during the quarter, recognising the revenue as other operating income; the Rest of the World segment reported Rs 158.22 crore of quarterly revenue, against Rs 72.55 crore for India.

SEPC also reported earnings before interest, tax, depreciation and amortisation of Rs 73.04 crore and positive cash profit for the six months. The company had accumulated losses of Rs 2,124.39 crore at September 30, 2026, but said its net worth remained positive and the accounts were prepared on a going-concern basis.

How much deferred-tax asset remains on SEPC's books?

SEPC retained a deferred-tax asset, or DTA, of Rs 91.63 crore at September 30, 2026, which management said could be used before the relevant expiry dates. Management based that view on its potential order book, projects in the pipeline and future business plans that it expects to produce taxable profits.

The company had recognised total DTA of Rs 162.31 crore on carried-forward unabsorbed business losses of Rs 464.48 crore as of September 30, 2026. Total carry-forward unabsorbed business losses were Rs 872.86 crore, compared with Rs 926.48 crore at September 30, 2025.

The DTA recognised on carried-forward business losses fell from Rs 281.88 crore at March 31, 2026 and Rs 257.66 crore at June 30, 2026 to Rs 162.31 crore at September 30, 2026. SEPC also said it made no current-tax provision because it had brought-forward losses and unabsorbed depreciation available for set-off.

What did SEPC's auditors qualify in their review?

SEPC's auditors issued a qualified conclusion because they lacked sufficient appropriate audit evidence to support management's assessment that future taxable profits would recover the remaining Rs 91.63 crore DTA. The auditors did not conclude that the asset was unrecoverable, but said they could not comment on any adjustment that may be required to its carrying value.

The review also qualified overdue project balances where the auditors said sufficient evidence of recoverability was unavailable. These comprised non-current contract assets of Rs 90.38 crore, net of Rs 10.36 crore of provisions, and non-current trade receivables of Rs 58.45 crore, net of Rs 5.39 crore of provisions, at September 30, 2026.

SEPC said the balances concern projects stalled by regulatory-approval delays and disputes, and that one customer is in liquidation. Management said it remained confident of full recovery based on the realisability of that customer's assets and ongoing customer negotiations, while the auditors noted that both the DTA and project-balance matters had also resulted in qualifications in earlier reports.

How is SEPC funding operations and liquidity?

SEPC received Rs 220.32 crore of promoter support through unsecured loans during the half year ended September 30, 2026. The loans carry interest of 0.1% a year, are repayable in December 2035, are not repayable on demand and rank subordinate to the claims of banks and other creditors.

Mark AB Capital Private Limited directly settled legal and other obligations, including vendor dues, employee salary arrears, statutory liabilities and lender payments, while SEPC's bank accounts were under attachment. The Madras High Court ordered withdrawal of the attachment on September 30, 2026 after settlement of the related arbitration matter, which SEPC said had no financial impact on the company.

SEPC recognised the promoter loan at a present value of Rs 95.05 crore and credited Rs 121.16 crore to other equity as a deemed capital contribution. Net operating cash used was Rs 47.49 crore for the latest half year, narrower than Rs 148.03 crore used a year earlier, while cash and cash equivalents ended the period at Rs 37.52 crore.

Conclusion

SEPC's reported first-half loss primarily resulted from a Rs 119.57 crore non-cash reassessment of deferred-tax assets nearing expiry rather than from a fall in pre-tax profitability. Revenue, total income and profit before tax all rose from the prior-year half, but the tax-accounting charge outweighed the Rs 49.98 crore pre-tax profit.

The next disclosed matters to watch are whether SEPC generates taxable profits supporting the remaining Rs 91.63 crore DTA and whether recoverability evidence emerges for stalled-project balances. SEPC has also proposed acquiring 90% of Avenir International Engineers and Consultants LLC through a share swap; shareholders approved it on August 5, 2026 and stock-exchange approval was received on November 6, 2026, subject to the requisite approvals described by the company.