Rathi Steel & Power's record carries a clean audit opinion for six straight years, but that clean opinion sits on top of a decade of bank defaults, debt restructuring, and profits that repeatedly depended on one-time settlement gains. The company calls itself "zero debt" as of March 2024, yet the clean opinions sat alongside CARO flags on statutory-dues arrears and bank defaults, and the only disclosed regulator action was a BSE suspension, revoked in July 2023.
Key findings
- "Zero debt" masks a decade of defaults, restructuring, and debt-like preference shares
Major- The company defaulted on bank dues since 2014-15, with the entire outstanding balance called by banks and most debt assigned to asset reconstruction companies. Defaults were also reported for FY2019-20 and FY2020-21. A debt restructuring with ACRE effective 01-04-2022 and an OTS with Canara Bank produced the "zero debt company" position as at 31 March 2024, but if either agreement is terminated, lenders can revoke all reliefs. Meanwhile, redeemable preference shares carry a 1% non-cumulative coupon, are redeemable after 10 years at a ₹20 premium, and one tranche's redemption was extended to 31 March 2034. - Reported profits repeatedly leaned on exceptional gains from debt settlements
Major- In FY2022-23, exceptional items of 75.22 crore accounted for most of the 87.47 crore profit before tax; in FY2023-24, exceptional items of 19.84 crore sat against 23.61 crore PBT. The company did not calculate deferred tax in either FY2023-24 or FY2024-25 "in view of losses incurred in preceding previous years," and its average effective tax rate was 0.1% versus the statutory 25.2% over four years. Financial statements also shifted from Indian GAAP in FY2022-23 to Ind AS by FY2024-25, with prior-year figures "recasted, regrouped and rearranged wherever necessary". - Clean audit opinions sat alongside CARO flags on statutory dues and bank defaults
Major- The statutory auditor issued unqualified opinions for FY2020-21, FY2022-23, FY2023-24 and FY2024-25, but CARO clauses reported statutory-dues arrears of ₹13.01 crore, ₹11.69 crore and ₹8.82 crore across three years, and bank defaults since 2014-15 in two of those years. In both FY2022-23 and FY2023-24, CARO noted the company had an internal audit system but "the reports of the internal auditors have not been made available to us". The FY2020-21 report carried an Emphasis of Matter, a special call-out in the audit report, noting net worth was fully eroded and lenders had exited the CDR scheme. - Promoter-family control tightened in FY2025-26 as public shareholders dissented on every resolution
Major- Ms. Surbhi Pareek, appointed independent director in July 2023, was re-designated non-independent effective 9 May 2025 after informing the Board of a change in circumstances; she is the niece of Mr. Mahesh Pareek, appointed Managing Director the same day. In the June 2025 postal ballot, public non-institution shareholders voted against all five resolutions at rates of 33.11% to 33.38%, while promoter votes were 100% in favour. The secretarial audit report for FY2022-23 stated the Board's constitution was not compliant with the Companies Act and SEBI (LODR) Regulations regarding Section 152. - Operating cash flow failed to back reported profit in two of the last three years
Minor- CFO/PAT was -0.10x in FY2025-26 and -0.79x in FY2024-25, against 1.03x in FY2023-24 and 1.21x in FY2022-23. Free cash flow was ₹-33.67 crore in FY2024-25 versus ₹10.96 crore the prior year, and ROCE fell from 31.37% in FY2023-24 to 11.73% in FY2024-25 and 10.42% in FY2025-26. Management guided to full-year FY2026-27 capex of approximately ₹15 crore plus, largely from internal accruals, after raising equity through preferential allotment to retire debt and fund the Ghaziabad plant ramp-up. - Revenue is concentrated in NCR, with receivables carried without provisions
Minor- Management states 80-90% of sales come from the NCR region, with TMT bars at 100% NCR. Sundry debtors include inter-party transfers subject to confirmation, and the Board made no provision for doubtful debts as it is "very much hopeful for their recovery". Disputed trade receivables are shown under other non-current assets with no provision made, and management declined to give the exact receivable outstanding for Q1 FY27. - The only disclosed regulator action was a BSE suspension, revoked in July 2023
Minor- BSE suspended trading in the company's shares for non-payment of annual listing fees, and the suspension was revoked effective 3 July 2023 after the company paid. The company's FY2025-26 corporate governance report states no significant or material orders were passed by regulators or courts impacting going concern.
What to watch
- GAIL settlement. The Settlement Advisory Committee reconciliation was disclosed as "at final stages of conclusion" in FY2024-25.
- Income Tax demands. Assessment orders and demand notices were received on 21 January 2026 for FY 2016-17, FY 2019-20 and FY 2022-23.
- GST demand. A demand of ₹5,73,33,332 with a similar penalty was raised on 30 December 2025 by the Deputy Commissioner, Ghaziabad.
- Refinancing and capex. Management stated in the Q1 FY27 transcript it is exploring refinancing to reduce borrowing costs, and guided to approximately ₹15 crore of full-year capex from internal accruals.
Bottom line: This is a disclosed and audited record of a company that has genuinely cleared its bank debt, but the clean balance sheet rests on settlements whose terms can be revoked, and the profit line has repeatedly depended on those settlements. The risk is concentrated in contingencies: the GAIL demand, the tax and GST demands dated 2026, and preference shares that carry debt-like obligations into 2034. Watch whether the GAIL reconciliation concludes, how the tax demands are resolved, and whether the promised capex is actually funded from internal accruals.