Sri Chakra Cement Ltd Forensic Report - SOIC x StockScans Report

as of Aug 2026

Sri Chakra Cement’s record is under severe pressure: the auditor has escalated going-concern warnings to a material-uncertainty emphasis as net worth turned deeply negative, an operational creditor has served an insolvency demand notice, and the company systematically channels funds to promoter-linked entities while borrowing from its own promoters. The statutory auditor resigned mid-tenure, and physical verification of assets has been omitted for two years.

Key findings

  1. The auditor escalated going-concern warnings to a material-uncertainty emphasis as net worth sank to negative ₹3,523.28 lacs Critical - The statutory auditor included an Emphasis of Matter on material going-concern uncertainty in FY26 because the company had negative net worth of ₹3,523.28 lacs and current liabilities exceeded current assets by ₹6,975.69 lacs as at 31 March 2026. The company incurred cash losses of ₹12.13 crore in FY26 and ₹45.75 crore in FY25, whereas no cash losses were incurred in FY24, FY23, or FY22. Property, plant and equipment were not physically verified by management during FY26 or the immediately preceding year FY25, and inventories were not physically verified during FY26.
  2. A coal supplier served a ₹2.91 crore IBC demand notice in August 2026, threatening insolvency proceedings Major - On 1 August 2026, Ushodaya Enterprises served a Demand Notice under the Insolvency and Bankruptcy Code, 2016 for an unpaid operational debt of ₹2,90,69,041 plus interest related to coal supply. The company also carries a Fuel and Power Purchase Cost Adjustment liability of ₹7.08 crores, of which ₹0.91 crores remains to be recognised when demanded. A previously disclosed ₹1.50 crore excise dispute spanning 2005-06 to 2009-10 across seven forums has vanished from recent filings, with the FY2024-25 auditor’s report stating the company has no pending litigations impacting its financial position.
  3. The company channels funds to promoter-linked entities through loans, advances, and service payments while borrowing from its own promoters Major - Shareholder approval was obtained on 25 August 2023 to advance loans and guarantees of up to ₹20 crore to four named promoter-linked entities and to grant loans and acquire securities of up to ₹50 crore in aggregate. As at 31 March 2024, the company had an outstanding unsecured loan from promoter Sri K Vijay Kumar of 16.36 crore and a loan from Envean Leasing and Investments Ltd of 2.85 crore. In FY2022-23, the company paid commission of 2.05 crore to Envean Leasing and Investments Ltd and land lease of 3.6 crore to Smt K V Naga Lalitha.
  4. Statutory auditor M/s Satyanarayana & Co resigned mid-tenure in August 2024, one year into a second five-year term Major - M/s Satyanarayana & Co were reappointed at the 41st AGM on 24 August 2023 for a second five-year term ending in 2028, but resigned on 14 August 2024 after signing the FY2023-24 financials. The company’s disclosure stated “Not Applicable” for any material reason behind the resignation, and the CARO report stated no issues were raised by the outgoing auditors. The internal auditor M/s T Atmakuri & Co also resigned in November 2024 and was replaced.
  5. Promoter family members hold executive roles with guaranteed remuneration even in loss years, and shareholder dissent on financial statements reached 31.83% Major - Promoter Vijay Kumar Kapilavai served as Chairman & Managing Director, with relatives Sriram Kapilavai as Whole-Time Director and Venkata Naga Lalitha Kapilavai as Non-Executive Director throughout FY2021-FY2026. Remuneration to Directors remained at 1.08 crore in both FY2025 and FY2026 despite net losses of ₹56.98 crore and ₹23.09 crore respectively. At the AGM held on 25 August 2025, the resolution to adopt the FY2025 financial statements received 31.83% votes against.
  6. A ₹1.70 crore depreciation shortfall was corrected without restating comparatives, and large Level-3 fair-value borrowings rely on an unchanged 11% discount rate Minor - The company identified a ₹1.70 crore depreciation shortfall for FY2023-24 due to a computational error and included it in FY2024-25 depreciation expense without restating FY2023-24 comparatives. Interest-free Sales Tax and Royalty deferment loans are measured at fair value using a discount rate of 11%, classified as Level 3, with the company stating that fair value equals amortised cost since the discount rate is unchanged.
  7. Operating cash flow is disconnected from losses, and a ₹30 crore captive solar plant was funded without CWIP ever appearing on the balance sheet Minor - In FY26, cash flow from operations was ₹5.38 crore against a net loss of ₹23.09 crore; in FY25, CFO was negative ₹15.45 crore against a net loss of ₹56.98 crore. A captive solar power generation unit of 5 MW was set up at Srikalahasti with an investment of about ₹30 crore, disclosed in the FY21 Board’s Report, yet the company reported zero Capital Work-in-Progress as at FY24 and FY23.

What to watch

Bottom line: This is a record where the auditor’s going-concern warning, the insolvency demand notice, and the systematic promoter-linked fund flows converge on a single question: can the company meet its obligations as they fall due. The resignation of the statutory auditor one year into a fresh term and the omission of physical asset verification for two years weaken the assurance available to investors. Watch the IBC notice and the promoter loan balances for the earliest signal of how that question is answered.