Safety Controls & Devices Ltd has a clean audit record on paper: unmodified opinions every year, no fraud reports, and a clean certification on internal financial controls. But the filings contradict each other on related-party dealings, the promoter-MD is in line for a 135% pay rise while cash flow is deeply negative, and two statutory auditors have resigned in 14 months. The reported profit is also not converting to cash, with receivables stretching to over a year of sales.
Key findings
- Company filings appear to differ on related-party transactions
Critical- The FY2025-26 Board's Report states all related party transactions were on an arm's length basis, with none falling under Section 188(1), and Form AOC-2 was not provided as there were no RPTs to report. The DRHP discloses director remuneration and a ₹69.81 lakh loan payable by the company to Managing Director Rajnish Chopra as an outstanding balance for FY2025. The announcement dated 30th May 2026 is a declaration under Regulation 33(3)(d) regarding an unmodified audit opinion and does not address loans to related parties. - Promoter remuneration reset to ₹80 lakh fixed plus 2% profit commission while cumulative operating cash flow is negative ₹50 crore over five years
Major- Rajnish Chopra, Promoter, Chairman and Managing Director, is proposed to receive fixed remuneration of up to ₹80,00,000 per annum effective 1 July 2026 for three financial years, plus a performance incentive of 2% of net profits. His past remuneration was approximately ₹34,00,000 per annum, making the proposed fixed amount a 135% increase. The company reported cumulative CFO of negative ₹50 crore over five years (FY22-FY26) against cumulative PAT of ₹30 crore, with FY26 CFO of negative ₹11.22 crore against PAT of ₹14.42 crore. - Two statutory auditor resignations in 14 months, each citing "pre-occupation in other assignments"
Major- Sanjay Rajiv & Co resigned as statutory auditor on June 05, 2024, citing "Pre-Occupation in other assignments"; Doshi Doshi & Co was appointed June 28, 2024. Doshi Doshi & Co resigned on August 11, 2025, citing the same reason, and S K Panchal was appointed the next day, August 12, 2025. The Independent Auditor's Report for FY2025-26 states no resignation of statutory auditor occurred during the year. - Repeated regulatory actions for Companies Act violations, including a penalty order and pending appeal
Major- The Registrar of Companies, Kanpur passed a penalty order dated February 20, 2025 against the company under Section 454 of the Companies Act for violation of Section 42(9), and the company filed an appeal before the Regional Director Northern Region on March 04, 2025. The company also filed a suo moto adjudication application on April 21, 2025 for default in compliance with Section 42(9) for not opening a separate bank account. The company disclosed penalties and liabilities for non-compliance with the GST Act, Income Tax and other laws, including lapsed/delayed filings over the last 5 years. - Receivables balloon to 379 days while cumulative CFO/PAT runs at -2.17x over five years
Major- Receivable days reached 379 in FY26, up 81% year-on-year from 210. Cumulative CFO/(PAT−other income) was -2.17x over five years, and free cash flow was negative for five consecutive years while PAT was positive. In FY26, revenue was ₹117 crore with PAT of ₹14.42 crore, but CFO was negative ₹11.22 crore, a CFO/PAT of -0.78x. - Multiple tax and litigation matters pending, though amounts at stake are small
Minor- A GST DRC-01 show cause notice dated May 28, 2024 carried a demand of ₹5,38,522, which was paid, with an application for waiver of interest and penalty pending. An Income Tax demand dated May 21, 2024 for ₹9,42,563 was deposited, with the interest amount disputed. The independent auditor's report on FY2025-26 states there is no pending litigation requiring disclosure. - Audit opinions and CARO responses are clean across every year
Clean- M/s Panchal S K & Associates issued an unmodified opinion on the standalone financial statements for FY ended March 31, 2026, with no qualifications, reservations, adverse remarks, or disclaimers. No fraud was reported by the statutory auditors under Section 143(12) for FY2025-26. The only noted difference is that revenue and purchases are recognized gross of GST in audited financials, but restated financials present them net of GST.
What to watch
- Shareholder vote on promoter remuneration. The Special Resolution for revision of remuneration of Rajnish Chopra is scheduled for the 11th Annual General Meeting on 26 September 2026.
- Appeal against penalty order. The appeal before the Regional Director Northern Region against the penalty order dated February 20, 2025 was pending as of the DRHP dated 13th Apr 2026.
- Reconciliation of AOC-2 disclosure. The FY2025-26 AOC-2 disclosure of nil RPTs stands against the loan payable and remuneration balances disclosed in the DRHP, as of the FY2025-26 Annual Report period.
Bottom line: This is a record with clean audit opinions and a clean internal-controls certification, but the contradictions between the Board's Report and the DRHP on related-party transactions are the central issue. The promoter's pay rise is being proposed against a backdrop of five years of negative operating cash flow, and the auditor churn warrants attention. Watch the shareholder vote on 26 September 2026 and the outcome of the appeal against the penalty order.