Hemant Surgical Industries' FY26 numbers look strong on the surface, revenue doubled to ₹232 crore and profit more than doubled, but the audit trail behind that growth is thin. The auditors relied on a management-prepared list of promoters and group companies for receivables, and the company's cash flow swung sharply negative even as profit rose. Across three years, the auditor has repeatedly flagged related-party loans with no repayment terms and director pay that did not comply with the Companies Act.
Key findings
- Revenue doubled, but the auditor relied on an unverified promoter list for receivables
Major- Revenue from operations rose from ₹107 crore in FY25 to ₹232 crore in FY26. Trade receivables in both the standalone and consolidated FY26 statements include unbilled amounts, and the list of promoters and group companies was prepared by management and relied upon by the auditors, who performed no procedure to verify its accuracy or completeness. - Cash flow swung to negative ₹32 crore even as profit more than doubled
Major- Consolidated operating cash flow was ₹8.84 crore against PAT of ₹8.04 crore in FY25, then swung to negative ₹32.04 crore against PAT of ₹18.19 crore in FY26. No dividend was recommended in FY25 or FY24 despite reported profits. - Interest-free, open-ended loans to promoter-linked entities, recurring across three years
Major- In FY26, the company granted unsecured loans to related parties of ₹512.03 lakhs and others of ₹3.41 lakhs, with the auditor unable to comment on repayment regularity where terms were not stipulated. Loans were repayable on demand or without specifying terms or period of repayment. The same pattern appeared in FY25 and FY24. Loans from related parties were interest-free and repayable on demand, while loans from others bore 12% p.a. simple interest. - Clean audit opinions, but repeated flags on pay, loan repayments, and audit trails
Major- The standalone auditor issued unqualified opinions for FY24, FY25, and FY26, with no key audit matters communicated in any year. However, the auditor stated in FY24 and FY25 that director remuneration was not in accordance with Section 197 of the Act. In FY26, the CARO report disclosed differences in quarterly bank returns for working capital limits, and the subsidiary's accounting software lacked an audit trail feature. - All three executive directors are promoter-family members with identical pay ceilings
Major- The FY25 AGM notice seeks reappointment of Hanskumar Shamji Shah, Hemant Praful Shah, and Kaushik Hanskumar Shah as executive directors, each for 3 years from December 20, 2025, with remuneration up to ₹8,00,000 per month. Managerial remuneration rose 20.36% in FY24 versus 4.44% for non-managerial staff. Promoter holding fell 20.73 percentage points year-over-year to 52.83%. - Borrowings are secured by promoter guarantees and a fixed deposit, while demand loans go to those same promoters
Major- Borrowings are secured by personal guarantees of Hanskumar Shah, Hemant Shah, and Kaushik Shah across five mortgaged properties, plus a fixed deposit receipt of ₹61.75 lakhs for a SIDBI loan. Simultaneously, the company granted loans to promoters and related parties repayable on demand or without specified terms in FY26. The company has not defaulted on loan repayments as of March 31, 2026. - A ₹3.56 crore customs dispute is pending before the Supreme Court, paid under protest
Minor- The company disputes customs classification of surgical tapes; the disputed amount of ₹3.56 crore was paid under protest and the appeal is pending before the Supreme Court. As of FY26, disputed dues outstanding include Income Tax and TDS of ₹18.01 lakhs and GST of ₹70.61 lakhs. - First-time consolidation via a subsidiary acquired days before year-end
Minor- The company had no subsidiary as of March 31, 2024, and acquired 100% of Solar Opto-Medic Private Limited on March 13, 2025. Consolidated statements were prepared for the first time in FY25, with no previous-year comparatives. The subsidiary had total assets of ₹61.45 lakhs and revenues of ₹99.11 lakhs for the year ended March 31, 2026.
What to watch
- Customs dispute outcome. The Supreme Court appeal on the ₹3.56 crore surgical tape classification matter was pending as of the FY26 annual report.
- Bank return differences. Whether the quarterly return differences disclosed in note no. 35 for FY26 are resolved or recur.
- Subsidiary audit trail. Whether the subsidiary's accounting software audit trail is implemented in FY27, given its absence in FY26.
- Chairman's age. Hanskumar Shamji Shah turns 70 on July 9, 2026, during his proposed reappointment term.
Bottom line: This is a fast-growing company with clean audit opinions and no repayment defaults, but the growth is carried by receivables the auditor could not independently verify, and cash flow turned sharply negative in FY26. The recurring pattern of interest-free, open-ended loans to promoter-linked entities, alongside promoter-guaranteed borrowings, concentrates risk in related-party fund flows. Watch the Supreme Court outcome, the FY26 standalone remuneration statement, and whether the bank return differences and audit trail gap get resolved.