Chandra Bhagat Pharma’s record carries a clean audit opinion for seven straight years and cash flow that has outpaced profit in all but one of them. Two things deserve attention: trade receivables have swollen to 171 days with no impairment allowance, and the auditor has flagged their recoverability as a Key Audit Matter for five consecutive years. A preferential warrant issue to the promoter family is up for shareholder vote.
Key findings
- Receivables hit 171 days with zero impairment, flagged by auditors for five years
Major- Trade receivables stood at ₹54.62 crore as at 31 March 2026, 58% of total assets. Receivable days reached 171 in FY26, up from 148 in FY25 and 65 in FY24. The auditor has included recoverability of trade receivables as a Key Audit Matter, an area needing the most judgement, in every annual report from FY22 through FY26. - Promoter family holds all executive roles, with a ₹29 crore warrant issue proposed
Minor- The five-person board consists of the Managing Director, his son as Whole-time Director, his daughter-in-law as Director & CFO, and two Independent Directors. The FY26 AGM notice proposes issuing 66,00,000 convertible warrants at ₹44 per warrant, aggregating ₹29.04 crore, with 24,50,000 warrants allotted to the three promoter directors. Promoter shareholding stood at 73.02% with zero pledge. - Historical statutory defaults and compliance lapses were fully resolved from FY22 onward
Minor- The auditor issued unqualified opinions from FY20 through FY26. In FY20 and FY21, the auditor flagged arrears of statutory dues, loan-repayment defaults, and non-compliance with Sections 185, 186, and 73 of the Companies Act. From FY22 through FY26, the auditor confirmed the company was regular in depositing statutory dues, had no loan defaults, and complied with Sections 185 and 186. - Operating cash flow consistently exceeds profit, with all earnings retained for expansion
Clean- Operating cash flow exceeded profit after tax in every year from FY21 through FY26 except FY25, when CFO was negative ₹5.71 crore against a PAT of ₹0.86 crore. The Board recommended no dividend for any of the last five years, retaining profits for future expansion. ROCE improved to 12.31% in FY26 from 6.12% in FY25.
What to watch
- Preferential warrant vote. The shareholder vote on the proposed issue of 66,00,000 warrants to promoters and non-promoters is pending, as per the FY26 AGM notice.
- Gratuity provision. Whether the company recognises a gratuity provision in the FY27 financial statements, given the non-provision has persisted since at least FY20.
Bottom line: This is a disclosed and audited record with real cash conversion and a clean compliance slate since FY22. The risk sits in one place: trade receivables, which now tie up 58% of the balance sheet at 171 days with no impairment allowance, a concern the auditor has flagged for five years running. Read the receivables line with that in mind, and watch whether the warrant issue passes and the gratuity provision finally appears.