Laxmipati Engineering Works’ record shows a company that has grown revenue fast but converted almost none of it to cash, while its governance disclosures and borrowing structure are deeply intertwined with promoter-linked entities. Revenue rose from ₹15.20 crore in FY23 to ₹71.99 crore in FY26, a 68% compound growth over three years, yet operating cash flow was just 19% of profit. The auditor has flagged revenue estimates as a Key Audit Matter for six straight years. The entire secured borrowing structure rests on assets owned by a related private company, and shareholder approvals are sought for related-party transactions at limits that dwarf the counterparties’ own financial capacity.
Key findings
- Revenue surged 44% but cash conversion collapsed to 19% of PAT
Major- Revenue rose from ₹15.20 crore in FY23 to ₹71.99 crore in FY26, a 68% compound growth over three years. Operating cash flow fell to ₹5.20 crore against profit of ₹27.04 crore, a cash conversion of 0.19x, while receivable days stretched from 29 to 79 days. The auditor has included “Accuracy of revenues and onerous obligation in respect of fixed-price contracts” as a Key Audit Matter, an area needing the most judgement, in every annual report from FY21 through FY26, noting the company uses the percentage-of-completion method with revenue recognised upon work certified by its own engineers. - Material related-party services sought at limits dwarfing counterparty’s financial capacity
Major- A February 2026 postal ballot sought approval for job work services from Laxmipati Apparel Private Limited up to ₹25 crore per annum, representing 49.90% of consolidated turnover, while the counterparty reported zero revenue, a net worth of ₹14.47 lakh, and profit of ₹0.20 lakh for FY2024-25. The three promoter-directors are common directors of the counterparty. For FY21, the Board’s Report stated no loans were given under Section 186(4), yet the CARO annexure disclosed loans of ₹1 crore given during the year with ₹1 crore outstanding at year-end. - Secured borrowings are collateralised entirely by a related company’s assets
Major- As of FY26, a ₹5 crore HDFC Bank term loan and a ₹15 crore cash credit facility are secured by factory land and building owned by Siddhi Vinayak Polyfab Pvt Ltd, and the cash credit facility is cross-collateralised for the exposure of Siddhi Vinayak Knots & Prints Pvt Ltd. The company’s own cash balance was ₹0.02 crore as of FY26. The debt-to-equity ratio moved from 5.26 in FY25 to 0.47 in FY26, a variation of (91.12)% in the current year attributed to reduced borrowings and improved net worth. - Operating cash flow has persistently lagged profits, and CWIP has ballooned
Minor- Cumulative operating cash flow of ₹8 crore covers only 23% of cumulative EBITDA of ₹33 crore over the ten years to FY26. Other income of ₹24.06 crore constituted 73.4% of profit before tax of ₹32.78 crore in FY26. Capital work-in-progress stood at ₹6.93 crore as of FY26, up from zero borrowing-cost capitalisation reported in FY21, and the company has not declared a dividend in the past up to FY22 and is not declaring one for FY26. - Internal and secretarial auditors share the Kejriwal surname; statutory auditor does not
Minor- M/s R. Kejriwal & Co. resigned as statutory auditor during FY23 and was later appointed as internal auditor for five years from FY2024-25 to FY2028-29. M/s R P R & Co. was appointed as statutory auditor from FY23 through FY26, with Raunaq Kankaria signing the audit reports dated 28 May 2024 and 26 May 2026. The secretarial auditor is Mr. Ranjit Binod Kejriwal, reappointed for five years from 1 April 2025 to 31 March 2030. - Three promoter brothers control the board, which has cycled through multiple independent directors and company secretaries
Minor- The board comprised three executive non-independent directors, who are brothers, and three non-executive independent directors as of 31 March 2026. No director received any remuneration or sitting fees in any year from FY21 through FY26. The Company Secretary and Compliance Officer position changed five times between August 2024 and January 2026.
What to watch
- Material RPT with Laxmipati Apparel Private Limited. The approval for job work services up to ₹25 crore covers the period 1 April 2026 to 31 March 2027; the counterparty reported nil revenue and a net worth of ₹14.47 lakh as of FY2024-25.
- Drawdown of the ₹22.70 crore HDFC Bank term loan. The loan was sanctioned on 24 February 2026 with disbursement pending as of the FY26 reporting date; its security package relies on assets of Siddhi Vinayak Polyfab Pvt Ltd and cross-collateralisation for Siddhi Vinayak Knots & Prints Pvt Ltd.
- CWIP commissioning or impairment. The ₹6.93 crore balance as of FY26 carries a history of multi-year project-development expenditure accumulation (D1, SQL).
Bottom line: This is a record of rapid revenue growth built on estimates the auditor has questioned for six years, with almost none of the reported profit turning into cash. The governance structure is inseparable from promoter-linked entities: the company borrows against their assets, seeks shareholder approval to transact with them at limits their own financials cannot support, and in FY21 disclosed no loans under Section 186(4) in the Board's Report while the CARO annexure showed loans of ₹1 crore given and outstanding. Watch whether the Laxmipati Apparel RPT results in actual transactions, whether the FY26 financial statements disclose related-party loan balances, and whether the new term loan is drawn down on the security of a related company’s factory.