Fermenta Biotech’s six-year audit record is unqualified. Three things cut across that record: the company channels loans and guarantees to loss-making subsidiaries on terms the auditor has flagged for years, goodwill and investments tied to the animal-feed and US businesses have been repeatedly written down, and a large deferred tax asset together with recurring provision reversals shape reported earnings.
Key findings
- Loans and guarantees flow to loss-making related entities on unstipulated or overdue terms
Major- The auditor reported for three consecutive years (FY22-FY24) that certain loans had no stipulated repayment schedule, preventing any comment on regularity of repayment. As at 31 March 2025, ₹12 crore of loans to five promoter-related entities were either repayable on demand or granted without any specified terms. The company now seeks shareholder approval for a ₹100 crore trading limit with step-down subsidiary Fermenta USA LLC, whose standalone net worth is negative ₹12.60 crore and which lost ₹2.65 crore in FY26. - Goodwill and subsidiary investments have been repeatedly impaired, with a ₹23 crore credit-loss provision supporting the remaining carrying value
Major- In FY24 alone, the company impaired its investment in Fermenta USA LLC by ₹9 crore and wrote off ₹7.43 crore of goodwill tied to the same subsidiary, citing prolonged subdued demand and revised cash flows. As of FY25, subsidiary loans and receivables of ₹54.32 crore are carried net of a ₹23.16 crore expected-credit-loss provision, and the auditor flagged the recoverability of investments in and loans/receivables from subsidiaries as a Key Audit Matter. - Property-segment revenue has shrunk from ₹64 crore to ₹1.6 crore, while the bulk-drug segment carries a history of inventory provisions and a subsidiary-receivable impairment
Minor- Revenue from sale of investment property fell from ₹63.88 crore in FY24 to ₹44.58 crore in FY25 and ₹1.63 crore in FY26. The company made provisions against inventory, investments, and receivables from subsidiary Ferment Biotech GmbH in FY23 because the animal-feed business “considerably reduced due to subdued global demand”.
What to watch
- Renewal of the ₹100 crore RPT limit with Fermenta USA LLC. The current approval is valid only until the next AGM in 2027, where shareholders will vote on renewal.
- Maturity of the extended inter-corporate deposit. The ₹1 crore deposit originally due 31 March 2026 was extended to 31 March 2028.
- Audit trail for privileged access. The exception remained unresolved as of the FY26 audit report dated 26 May 2026; the next annual report will show whether the gap has been closed.
- GST appeal outcome. The appeal against the ₹1.36 crore demand order was filed with a pre-deposit of ₹13.56 lakh in FY26.
- Liquidation of Fermenta Biotech USA LLC. No scheduled completion date was disclosed as of the FY26 annual report.
Bottom line: This is a disclosed and audited record with cumulative cash generation that covers reported profit. The risk sits in the related-party channel: loans and guarantees flow to loss-making subsidiaries on terms the auditor has flagged for years, and the proposed ₹100 crore trading limit with a deeply negative-net-worth step-down subsidiary puts fresh capital at stake. Watch the RPT vote at the next AGM, the audit-trail gap, and whether the extended inter-corporate deposit is repaid by March 2028.