STC India's Financials Under Scrutiny After Qualified Opinion

Introduction

The State Trading Corporation of India Limited (STC) finds itself in a challenging financial position following the release of its unaudited results for the quarters ending September 30, 2025, and December 31, 2025. A Board Meeting held on February 11, 2026, approved the financials, but the accompanying Limited Review Reports from statutory auditors P V A R & Associates delivered a qualified opinion, signaling significant concerns over the company's accounting practices and asset valuation.

Auditors Raise Serious Concerns

The qualified opinion from P V A R & Associates casts a significant shadow over STC's financial health. The primary issue highlighted by the auditors is the overstatement of non-current assets held for sale. According to the report, the valuation of these assets is inaccurate due to expired lease periods and the company's failure to properly account for land parcels acquired by the Delhi Metro Rail Corporation (DMRC) and the Land & Development Office (L&DO). This discrepancy means the company's balance sheet may not present a true and fair view of its financial state, with the auditors noting that the exact financial impact could not be quantified due to a lack of complete data from the company.

A Pattern of Financial Irregularities

This is not an isolated incident. A review of past audit reports for fiscal years 2023 and 2024 reveals a consistent pattern of red flags. For years, the company's financial statements have been prepared on a 'non-going concern' basis, a decision made by the Board of Directors in April 2021. This accounting basis is used when a company is not expected to continue its operations in the foreseeable future. The auditors have repeatedly pointed out issues such as unreconciled GST input and payable balances, leading to potential overstatements of profit. For instance, in FY24, a GST input of Rs 64.73 lacs was deemed non-claimable, but no provision was made.

Financial Performance Under Pressure

A look at STC's quarterly performance underscores its operational challenges. While the company reports profits after tax in some quarters, this is largely driven by 'Other Income' rather than core business operations. For the quarter ending March 2025, the profit before tax was Rs 13.95 crore, but this was after accounting for Rs 27.79 crore in other income, which offset a pre-tax loss from operations of Rs 13.40 crore. This reliance on non-operational income to maintain profitability is an unsustainable model and points to deeper issues within its primary business activities, which are currently non-operative.

Governance Changes Amidst Turmoil

In an apparent move to strengthen its corporate governance and compliance frameworks, STC has made several key appointments. On March 10, 2026, Smt. Ritu Bhatia is set to take over as the Company Secretary, KMP, and Compliance Officer. This follows the appointment of M/s Kumar Naresh Sinha & Associates as the Secretarial Auditor for a five-year term from FY 2025-26 to FY 2029-30, a decision ratified at the 69th Annual General Meeting on January 15, 2026. The company also appointed Nitin Kumar Yadav as its Chairman and Managing Director. These appointments are critical as the company navigates its complex financial and regulatory challenges, especially with a board that has been functioning without full-time working directors.

The 'Non-Going Concern' Basis

The Board's decision to prepare financial statements on a 'non-going concern' basis since 2021 is a significant disclosure. It reflects the reality that STC is not currently engaged in any business activities and is functioning as a non-operative entity. This status has implications for how assets and liabilities are valued, as they are assessed on a realizable or settlement basis rather than on their value in continuing operations. The auditors have noted that despite this policy, the management has not fully determined the realizable value of each asset, leading to potential misstatements.

Legal and Contingent Liabilities

STC is also entangled in significant legal disputes that add to its financial uncertainty. The company is pursuing a claim of Rs 527.86 crore admitted by the liquidator of a foreign buyer, Loben Trading Co. Pte. Ltd. Another case involves a decree of approximately Rs 62.47 crore in its favor against Sweetland Trading Pte Ltd. However, STC is also a party in a legal suit filed by banks against another entity, with claims against STC amounting to Rs 476.47 crore. These sub-judice matters, some of which are under CBI investigation, create substantial contingent liabilities that are difficult to quantify but pose a risk to the company's finances.

Conclusion

The State Trading Corporation of India is at a critical juncture. The recurring qualified opinions from its statutory auditors highlight deep-rooted issues in asset valuation, internal financial controls, and accounting practices. While recent appointments in key governance roles signal an intent to address these problems, the path forward remains challenging. The company's 'non-going concern' status, coupled with significant legal battles and a lack of operational income, paints a picture of a public sector enterprise in need of a comprehensive strategic overhaul to resolve its legacy issues and restore financial credibility.