Starcom leaves ₹6.07 crore rent unprovided, auditor says

Starcom Information Technology Limited had not recognised ₹6.07 crore of rent expense for 1 April 2019 to 31 July 2024 as at 30 September 2026 while negotiating a waiver with landlords including a promoter. The auditor said recognising the amount would increase Starcom’s liabilities and debit balance of other equity by ₹6.07 crore.

Why has Starcom not recognised the rent expense?

Starcom has not recognised the rent expense because management is discussing a waiver for the relevant period and a reduction in earlier outstanding dues with the lessors. The company said constraints in working-capital financing and substantial use of funds for intangible assets under development prevented it from meeting office-premises rent obligations.

The office premises are jointly owned by one of Starcom’s promoters and the promoter’s business partner, according to the filing dated 14 November 2026. Rent outstanding through 31 March 2019 was ₹6.61 crore, net of tax deducted at source, while the rent expense not recognised from 1 April 2019 to 31 July 2024 was ₹6.07 crore.

The ₹6.07 crore unrecognised amount did not include any rent expense for the quarter or half year ended 30 September 2026, for which the disclosed amount was nil. Starcom said the financial effect of its discussions with the lessors had not been ascertained, meaning the filing does not report a completed waiver, settlement or reduction of the rent dues.

What would recognising the omitted rent change?

The auditor said recognition of the ₹6.07 crore would increase Starcom’s liabilities and the debit balance of other equity by the same amount as at 30 September 2026. The auditor further said the adjustment would not increase rent expense or loss for either the September 2026 quarter or half year because the omitted amount relates to the earlier period ending 31 July 2024.

This treatment is an accounting matter pending negotiations rather than a recorded outcome. Starcom reported that it was seeking waiver of rent for the relevant period and a reduction in previous years’ outstanding dues to the extent feasible, while the auditor included the matter among the observations to its limited review of the September 2026 results.

The reported half-year loss after tax was ₹3.47 crore for the six months ended 30 September 2026, compared with ₹2.80 crore in the corresponding 2025 period. The omitted rent is therefore separate from the reported current-period loss, but the auditor’s quantified adjustment would add ₹6.07 crore to balance-sheet liabilities and negative other equity at the reporting date.

How does the rent issue compare with Starcom’s financial position?

The ₹6.07 crore unrecognised rent was more than seven times Starcom’s ₹78.61 lakh total income for the half year ended 30 September 2026. It also exceeded the reported ₹3.47 crore half-year loss after tax, while the auditor said its recognition would increase the debit balance of other equity rather than affect the September 2026 period’s loss.

Starcom reported total equity of negative ₹33.51 crore at 30 September 2026, against negative ₹30.04 crore at 31 March 2026. Other equity moved to negative ₹38.51 crore from negative ₹35.04 crore over the same period, reflecting the reported half-year loss of ₹3.47 crore.

Current liabilities rose to ₹52.87 crore at 30 September 2026 from ₹51.09 crore at 31 March 2026, while current assets fell to ₹1.39 crore from ₹2.49 crore. Starcom said its net worth was fully eroded and it had incurred cash losses, although management prepared the financial statements on a going-concern basis.

What other matters did Starcom’s auditor raise?

The auditor also raised a matter concerning ₹24.31 crore of intangible assets under development for business-intelligence and data-quality software at 30 September 2026. The software asset had remained incomplete for a long time, and the auditor said it lacked appropriate audit evidence to assess whether future economic benefits were probable or whether any impairment loss was required.

Starcom said it believes future economic benefits attributable to the ₹24.31 crore software asset will flow to the company. The carrying value was unchanged from 31 March 2026, while segment assets for Data Quality, Statistical and Analytics Software were ₹24.73 crore at 30 September 2026, down from ₹25.98 crore at the preceding year-end.

Overdue statutory dues totalled ₹16.49 crore at 30 September 2026, including ₹10.47 crore of interest. The dues comprised ₹2.38 crore for sales tax, service tax and goods and services tax; ₹2.07 crore for provident fund, Employees’ State Insurance Corporation and professional tax; and ₹12.04 crore for tax deducted at source.

The auditor said Starcom had provided interest through 30 September 2026 but that other consequential effects under the relevant laws had not been ascertained. Separately, the company recorded ₹10 crore from a city builder as other current liability because it lacked documents to determine the nature of compensation linked to vacating premises previously leased for 40 years.

How did Starcom perform in the September 2026 half year?

Starcom reported total income of ₹78.61 lakh for the half year ended 30 September 2026, down from ₹86.81 lakh in the corresponding 2025 period. Total expenses increased to ₹4.25 crore from ₹3.67 crore, producing a loss after tax of ₹3.47 crore compared with a loss of ₹2.80 crore a year earlier.

The increase in expenses included an expected-credit-loss provision of ₹80.79 lakh, compared with ₹15.35 lakh in the half year ended 30 September 2025. Finance costs declined to ₹28.95 lakh from ₹45.57 lakh, but unallocable expenses net of income increased to ₹3.02 crore from ₹2.17 crore.

Test, Measurement and Embedded Solutions for the Educational Sector generated ₹63.89 lakh of revenue in the September 2026 half year, down from ₹74.23 lakh a year earlier. Data Quality, Statistical and Analytics Software generated ₹7.79 lakh, compared with ₹2.26 lakh, although the two segments together recorded a ₹15.50 lakh loss before finance costs and unallocable expenses.

Operating cash flow was negative ₹1.18 crore for the half year ended 30 September 2026, compared with negative ₹1.89 crore for the year ended 31 March 2026. Starcom ended the half year with cash and cash equivalents of ₹5.49 lakh, down from ₹6.95 lakh at 31 March 2026, while short-term borrowings increased to ₹13.44 crore from ₹12.44 crore.

Conclusion

Starcom’s unrecognised ₹6.07 crore rent expense is linked to negotiations with office landlords that include a promoter and follows ₹6.61 crore of rent outstanding through March 2019. The auditor quantified the potential balance-sheet adjustment against reported negative equity of ₹33.51 crore and current liabilities of ₹52.87 crore at 30 September 2026.

The next disclosed matter to watch is the outcome of management’s waiver and dues-reduction discussions, which remains unascertained in the filing. Management is also pursuing prospective investors to meet working-capital needs, while the unresolved audit matters include evidence supporting the ₹24.31 crore software asset and consequential impacts of ₹16.49 crore in overdue statutory dues.