Nikhil Adhesives' record carries seven years of clean audit opinions and no defaults or fraud findings, but the FY2025-26 numbers tell a different story. Operating cash flow has turned sharply negative against a thin profit, accounting corrections and write-backs have reshaped reported earnings, and the company is seeking approval to pay one executive director remuneration exceeding 1% of net profits against a standalone PAT of ₹0.26 crore.
Key findings
- Operating cash flow has collapsed relative to profit, while dividends and expansion continue on short-term borrowings
Major- Consolidated PAT was ₹0.26 crore in FY14 against standalone PAT of ₹21.11 crore, and CFO/PAT swung to -7.88x from 14.12x a year earlier. Cumulative CFO covered only half of EBITDA over five years, and short-term borrowings made up 58% of total borrowings. A dividend of ₹0.22 per share was paid during FY2025-26. - Accounting-policy changes, restatements and a tax write-back repeatedly reshape reported profit
Major- Effective 1 April 2025, the company changed inventory valuation from FIFO to Weighted Average and Standard Cost methods, with a cumulative retained-earnings impact of ₹44.76 lakhs and restated statements for FY2024 and FY2025. A corrigendum dated 14 November 2025 cut Q2 FY26 PAT from 4.28 crore to 3.17 crore and raised current tax from ₹9.00 lakhs to 1.19 crore. On 13 February 2026, auditor PHD & Associates drew an Emphasis of Matter on a ₹70.50 lakh write-back of a Deferred Sales Scheme liability, noting tax authorities may require reinstatement with interest and penalty. - Shareholder authority sought to borrow ₹250 crore and encumber substantially all assets, on top of existing promoter guarantees
Major- Members at the EGM on 16 June 2025 approved borrowing up to ₹250 crore under Section 180(1)(c), and the Board is seeking approval to create mortgages and charges over assets. Existing secured borrowings are personally guaranteed by promoters, backed by pledge of 57,28,900 shares and equitable mortgage of residential flats, though this collateral was released by banks on August 02, 2024. Working capital statements filed with banks differed from books across all four quarters of FY2025-26 for inventory, while trade receivables differed only in Q2. - Revenue quality is deteriorating as receivables stretch and customer concentration deepens
Major- Receivable days rose from 63.44 in FY13 to 74.86 in FY14, and revenue from an individual customer exceeded 10% of total revenue in FY2025-26. Turnover fell from ₹743 crore to ₹564 crore in FY2023-24 after a policy decision to cut the Trading division, whose revenue dropped from ₹133.83 crore to ₹42.95 crore. Contract manufacturing is mainly for Asian Paints Ltd.. - Three statutory audit firms in six years, including a mid-term resignation, and a secretarial auditor resigned after 16 months
Major- M/s. PPV & Co. resigned as Statutory Auditor effective 08 August 2024, citing "inability to continue", and was replaced by M/s Jay Shah & Associates for one year. M/s PHD & Associates was re-appointed at the 39th AGM on 23 September 2025 for five years. M/s. Somani & Associates resigned as Secretarial Auditor effective 13 August 2026, citing "personal reasons", after being appointed for five years at the 39th AGM. - Seven years of clean audit opinions and clean CARO clauses, with only recurring IEPF delays and bank-vs-books differences
Minor- The standalone audit opinion was unqualified every year from FY2019-20 through FY2025-26, and the internal financial controls opinion was also clean throughout. No default, wilful-defaulter status or fraud was reported in any year from FY2019-20 through FY2025-26, and no cash losses were reported in FY2022-23 through FY2025-26. IEPF transfer delays recurred, including a 21-day delay in FY2020-21, and ₹49,230 of unclaimed dividend remained pending as of the FY2025-26 report date. - Contingent liabilities wound down to nil by FY2024, with a fresh commitment in FY2026
Minor- A disputed Sales Tax demand was settled under the Maharashtra Settlement of Arrears of Tax Act, 2022, with ₹10.38 lakhs paid and ₹58.41 lakhs waived. As at 31 March 2024, the company had no contingent liability. In FY2025-26, the company disclosed a capital commitment of ₹503.17 lakhs to be incurred over 2 years, and an Income Tax demand of ₹8.53 lakhs as a contingent liability.
What to watch
- 40th AGM vote. Shareholders vote on 31 August 2026 on re-appointment of the three Sanghavi brothers and on Dr. Satish Gaonkar's remuneration exceeding 1% of net profits.
- Tax authority response. Outcome of the ₹70.50 lakh Deferred Sales Scheme write-back flagged by the auditor on 13 February 2026.
- New contingent liability. Resolution or crystallisation of the FY2025-26 commitment to be incurred over 2 years.
- Secretarial auditor ratification. Shareholder approval of M/s. Deepika Mishra & Associates for FY 2026-27, following the casual vacancy filled on 13 August 2026.
- IEPF filing. Pending Form IEPF-4 noted in the FY2025-26 secretarial audit.
Bottom line: This is a company with a clean audit history and no defaults, but the FY2025-26 record shows cash flow stress, repeated accounting adjustments, and governance concentrated in three promoter brothers. The risk is that reported profit is being shaped by policy changes and write-backs while operations are funded by short-term borrowings and promoter guarantees. Watch the AGM vote on remuneration and the tax authority's response to the write-back.