Merritronix's FY26 audit is qualified, the company admits it does not maintain the mandatory audit-trail facility, and the auditor's report was issued before the Directors' Report was made available. Revenue is growing, but the cash behind it has turned sharply negative, and reported profits rest on a series of accounting corrections.
Key findings
- The FY26 audit is qualified, the audit-trail facility is not maintained, and the auditor's report predates the Directors' Report
Critical- The independent auditor issued a qualified opinion on the standalone FY26 financial statements, stating they give a true and fair view "except for the effects of the matter described in the Basis for Opinion Section". The specific matter is not disclosed in the pages provided, as the Basis for Opinion content is absent. The auditor also states the Directors' Report "was NOT made available to the auditor at the date of the auditor's report," and that the mandatory audit trail (edit log) facility "is not being maintained by the company". - Receivables are outpacing sales and cash conversion has turned sharply negative
Major- Revenue grew from ₹53.17 crore in FY23 to ₹156 crore in FY26, but receivable days rose from 47.65 in FY24 to 85.57 in FY26. Cash flow from operations was negative ₹23.38 crore in FY26 against a profit of ₹16.10 crore, and negative ₹6.64 crore in FY25 against a profit of ₹8.66 crore. Over FY23-FY26, cumulative operating cash flow was negative ₹26 crore against cumulative profit of ₹28 crore. - Reported profits rest on repeated accounting corrections and policies that depend on future profitability
Major- Restatement adjustments to prior years include reversals of prior-period items, depreciation, gratuity, deferred tax, MSME interest, and interest on late tax payments. The notes disclose that depreciation, gratuity, deferred tax, lease rent, and MSME interest had not been correctly recognised in earlier periods. Deferred tax assets and MAT credit are recognised only with reasonable or virtual certainty of realization, yet cumulative CFO over FY2023-FY2026 is negative ₹26 crore against cumulative PAT of ₹28 crore, a CFO/(PAT−other income) ratio of -0.98x. - Bank borrowings are secured against current assets whose reported values have repeatedly diverged from the books
Major- Secured borrowings were ₹18.46 crore (87.30% of total indebtedness) as at September 30, 2025. Stock statements submitted to banks showed material discrepancies, including a 5.74 crore stock difference and a 2.28 crore book debts difference for Q4 FY2023-24 submitted to Axis Bank. Short-term borrowings were ₹37.90 crore of total borrowings of ₹43.20 crore (88%) in FY26. - Related-party dealings shifted from sales to heavy purchases, with promoter loans outstanding
Minor- Purchases from related parties were 2.66 crore for the period ended 30/09/2025, against nil sales to related parties in the same period. Loans to directors stood at 1.05 crore as at March 31, 2024. The Board's Report states these transactions were on an arm's length basis and in the ordinary course of business. - A modest but persistent stack of disputed tax demands and one arbitration challenge
Minor- Contingent liabilities rose from ₹12.04 lakhs as at 31.03.2024 to ₹75.73 lakhs as at 31.03.2025. Tax proceedings against the company total 12 cases amounting to ₹61.55 lakhs, and an arbitration filed by Tata Consultancy Services Limited seeking to set aside an award of ₹20,27,437 is pending. The auditor reported no pending litigations would impact the financial position. - Auditor churn preceded the IPO
Minor- Chengalrayulu & Associates resigned as auditor on November 15, 2023, citing pre-occupancy. Dagliya & Co. was appointed on March 01, 2024, and re-appointed on September 30, 2024. - One compounding order for a Section 185 violation and a cluster of ROC strike-offs involving directors
Minor- The Regional Director passed an order dated March 27, 2026 compounding an offence under Section 185 of the Companies Act, 2013. Three independent directors were associated with companies struck off by the ROC, and two promoter-directors were directors of companies struck off or voluntarily dissolved. No penalties, show-cause notices, or ongoing regulatory actions are reported.
What to watch
- Missing audit disclosures. The specific Basis for Opinion qualification matter and the CARO 3(vii)(b) statutory-dues exception list are referenced but omitted from the FY2025-26 Annual Report excerpt.
- Deferred tax and MAT credit write-downs. Whether these assets are written down in subsequent periods, given cumulative negative CFO of ₹-26 crore over FY2023-FY2026 against positive PAT.
- Further restatement adjustments. Whether the next annual report discloses more corrections to prior-period depreciation, gratuity, deferred tax, lease rent, MSME interest, or tax interest, following the pattern in the DRHP dated 8th Jun 2026.
- GST appeal. Outcome of the company's appeal filed November 26, 2024 against demands of ₹4.12 lakhs, ₹0.01 lakhs, ₹45.76 lakhs, and ₹13.80 lakhs.
Bottom line: This is a disclosed record with a growing revenue line, but the FY26 audit is qualified, the company admits it does not maintain the mandatory audit-trail facility, and the cash behind reported profits has turned sharply negative. The risk sits in the gap between profit and cash, and in accounting corrections that have repeatedly restated prior years. Watch whether the missing audit disclosures surface, and whether deferred tax and MAT credit are written down in the next annual report.