Ellenbarrie Industrial Gases' record carries two years of unqualified audit opinions, no defaults, and no insolvency proceedings. The concerns sit in the quality of reported profit, the use of IPO proceeds, and recurring reporting lapses flagged by the auditor.
Key findings
- Bank-filed quarterly returns do not agree with the books
Major- The statutory auditor reported under CARO that quarterly returns filed with banks on working-capital limits exceeding ₹5 crore were not in agreement with the books of account in both FY2025 and FY2026. Borrowings are secured by charges on receivables, inventory, and property, plus personal guarantees from the CMD and JMD and a corporate guarantee from Varun Tea Plantations. The company reported no default or covenant breach in either year. - Operating cash flow recovered in FY26, but IPO proceeds went to repay debt, not the ₹450 crore expansion
Major- CFO/PAT swung from 0.05x in FY25 (₹4.28 crore CFO on ₹83.29 crore PAT) to 1.27x in FY26 (₹133 crore CFO on ₹104 crore PAT). IPO proceeds of ₹210 crore were used to repay term and working-capital loans, leaving ₹67.75 crore unutilised in fixed deposits at March 31, 2026. Management guided ₹450 crore of capex for two merchant plants, with construction started on both. - Reported profit is shaped by a revaluation reserve, a low tax rate, and partially quantified one-offs
Major- Freehold and leasehold land carry ₹23.19 crore of pre-2016 revaluations, and the company pays tax under Section 115BAA at an effective rate of 25.17%. Q4 FY26 reported EBITDA of ₹25.8 crore included one-offs of ₹1.1 crore, ₹2.0 crore, and ₹1.5 crore, which the PPT identifies as employee leave encashment, impairment on a legacy non-core investment, and a one-time settlement with an onsite customer. - Clean audit opinions, but with recurring exceptions on audit trail and payroll-software backups
Major- MSKA & Associates issued unqualified opinions for FY2025 and FY2026. Both years carry exceptions: the audit trail feature was enabled only from June 21, 2024 in FY2025 and from April 29, 2025 in FY2026, and the auditor could not verify daily backups of payroll software were kept in India from November 01, 2025. The FY2025 CARO report also noted loans were extended to settle overdue existing loans. - Revenue is shifting toward uncontracted merchant capacity
Minor- Revenue grew 9.31% to ₹341.6 crore in FY2026, with no customer contributing 10% or more. Management confirms the new merchant plants are "not backed by advance contracting of the capacity," with customer contracting beginning only 3-4 months before commissioning. - A disputed ₹3.5 crore supplier claim carries no provision
Minor- A supplier has claimed approximately ₹3.5 crore for non-acceptance of delivery, which the company disputes with a counter-suit; no provision has been made. Disputed statutory dues and tax disputes are disclosed in tables, and no insolvency proceedings were filed during FY2026. - Auditor change and a cost-auditor fee increase are disclosed
Minor- A. R. Kumar & Co. resigned effective March 30, 2024, and MSKA & Associates was appointed via a casual-vacancy EGM. Cost auditor remuneration was ratified at ₹60,000 for FY2026 and ₹1,00,000 for FY2027. - Related-party dealings are disclosed as arm's length
Minor- Promoter-linked guarantees secured ₹149.11 crore of borrowings as of March 31, 2026, down from ₹206.43 crore. The Board states no materially significant related-party transactions occurred, and trade receivables from related parties stood at ₹0.04 crore. - The Truair acquisition checks out
Clean- Ellenbarrie acquired Truair Industrial Gases' manufacturing facilities for ₹5.41 crore under a Business Transfer Agreement dated August 05, 2025. The purchase price allocation was completed with a minor ₹0.22 crore adjustment to Capital Reserve.
What to watch
- North India plant commissioning. The 220 TPD merchant plant has no advance contracts tied up as of Q1 FY27.
- Supplier claim outcome. The ₹3.5 crore claim and counter-suit remain pending before courts as of the FY2025-26 Annual Report.
- Term loan repayments. A ₹18.24 crore term loan starts 76 monthly instalments in January 2027, and a ₹7.62 crore loan starts 25 quarterly instalments in June 2027.
- Foreign currency loan maturities. A hedged loan of ₹13.81 crore is repayable by January 2027, and an unhedged loan of ₹8.79 crore by March 2027.
- Next audit opinion. The FY2027 audit follows the FY2026 report dated May 22, 2026.
Bottom line: This is an audited record with clean opinions, no defaults, and a recovering cash flow. The risk is in the gap between the stated growth strategy and its funding: IPO proceeds repaid debt, the expansion relies on uncontracted merchant capacity, and reported profit carries layers of revaluations, tax-rate choices, and unexplained one-offs. Watch the plant commissioning and the repayment schedules ahead.