Electronics Mart's audit record is clean on its face, unqualified opinions in each of the last four years, but the substance beneath it carries several layers of regulatory and accounting friction. Three GST-related demands totalling ₹163.11 crore remain unresolved, reported debt is backstopped by promoter personal guarantees and pledged properties, and the company's largest revenue-adjacent accrual has been a recurring audit focus. The profit line itself is shaped by reclassifications and one-off items, and cash conversion has been weak and volatile over eight years.
Key findings
- Three GST/customs demands totalling ₹163.11 crore remain unresolved
Major- A National Anti-Profiteering Authority order demanding ₹3.43 crore has remained outstanding from FY23 through FY26, with appeals pending and no provision made. A Director General of GST, Hyderabad order demanding ₹110.16 crore in FY25 for alleged failure to levy GST on vendor credit notes decreased to ₹107.26 crore in FY26. A new ₹52.42 crore demand from the Commissioner of Customs and GST, Hyderabad for alleged irregular input tax credit during 2018-19 and 2019-20 appeared in FY26, with appeals filed. - Debt is backstopped by promoter personal guarantees while the borrowing ceiling seeks a 50% hike
Major- Working capital loans from ICICI Bank and Axis Bank are personally guaranteed by Pavan Kumar Bajaj and Karan Bajaj, and the HDFC facility is additionally secured by pledge of their personal properties. The Board proposes to increase the Section 180(1)(c) borrowing limit from ₹2,000 crore to ₹3,000 crore, superseding the resolution passed on 27 April 2023. India Ratings and Research affirmed bank facilities of 803.07 crore at IND A/Stable/IND A1 on 11 December 2025. - Supplier incentive income is a recurring audit focus, and FY26 reclassified it out of revenue
Major- The auditor designated revenue recognition of incentive income as a Key Audit Matter in FY2024-25, when the company accrued ₹258.94 crore, a sum exceeding the entire year's profit, citing complexity from the volume of schemes, significant estimates and a manual computation process. During FY2025-26, sell-out scheme incentives and cash discounts were reclassified from 'Revenue from operations' to a reduction from 'Purchases of Stock in Trade', an adjustment that increased profit before tax for the previous year. Retail contributed approximately 99% of total revenue in FY2025-26, with no single customer accounting for more than 10%. - Audit opinions stayed clean for four years, but the audit-trail exception persisted throughout
Major- Walker Chandiok & Co LLP issued unqualified opinions on the standalone and consolidated financial statements for each of FY2023 through FY2026. The audit-trail exception under Rule 11(g) was reported every year: FY2024 software had no audit-trail feature at all, FY2025 had it at application level but not database level, and FY2026 had database-level gaps for 1 April 2025 to 21 April 2025. The FY2025 CARO report disclosed one instance of third-party fraud aggregating ₹2.73 crore, of which ₹1.08 crore was recovered. - Reported profits are shaped by exceptional items and a reclassification that lifted prior-year profit
Major- In FY2025-26, the company recognised a ₹7.67 crore gain on disposal of four "IQ" retail stores for total consideration of ₹8 crore, and a ₹7.53 crore insurance settlement after a fire damaged inventory valued at ₹8.17 crore. The supplier-incentive reclassification decreased inventories, increased profit before tax and decreased other equity for the previous year. The inventory provision for net realisable value and slow-moving stock stood at ₹95.36 crore as at 31 March 2026, up from ₹65.33 crore a year earlier. - A promoter family holds all three executive seats, with modest pay and small governance blemishes
Minor- Pavan Kumar Bajaj (Chairman & Managing Director), his son Karan Bajaj (CEO) and his daughter-in-law Astha Bajaj (Executive Director) together hold all three Executive Director positions on the six-member Board as of 31 March 2024. Shareholders approved their re-appointments at the 5th AGM on 23 August 2023 at annual salaries of ₹2.2 crore, ₹2.4 crore and ₹1.5 crore respectively. Public institutional shareholders cast 14.6% votes against Astha Bajaj's appointment resolutions, and ₹16,298 was transferred to the Investor Education and Protection Fund for an insider-trading-code violation by a relative of a Designated Person. - Cash conversion is weak and volatile, with FY26 the strongest year on record
Minor- Cumulative operating cash flow of ₹995 crore covered only 0.41x of cumulative EBITDA of ₹2,398 crore over the eight years through FY2026. FY2025 free cash flow was negative at ₹-148 crore, and FY2024 at ₹-2.08 crore. FY2026 CFO of ₹444 crore covered 4.14x of PAT of ₹107 crore, the strongest single-year conversion in the reported history, and no dividend was recommended for FY2025-26.
What to watch
- GST appeal outcomes. Appeals against the three orders (₹3.43 crore, ₹107.26 crore, ₹52.42 crore) were pending before appellate authorities as of the FY2025-26 Annual Report.
- Customer disputes item. The ₹8.94 crore item disclosed in FY25 was absent from FY26 contingent liability disclosures.
- Kolkata property purchases. Property transactions of approximately ₹50 crore are expected in Q1/Q2 FY28, with planned capex of around ₹100 crore for upcoming stores.
- Margin guidance. Full-year FY2026-27 gross margin is guided at 15% to 15.5% versus 17.2% reported in Q1 FY27, which management said was elevated by temporary low-cost inventory.
Bottom line: This is a disclosed and audited record with a clean opinion history, but the substance carries real friction. The risk sits in three places: unresolved regulatory demands, debt that lenders want personal wealth behind, and a profit line shaped by accounting choices and one-off items. Cash conversion finally strengthened in FY26, but the eight-year record is thin. Watch the AGM vote, the appeal outcomes and whether the reclassification becomes a pattern.