Epack Durable's FY2025-26 record carries its first-ever qualified audit opinion, a material weakness in internal controls, and a disputed ₹19.61 crore receivable with no provision. The year also brought an ₹81.01 crore customs demand upheld by the Delhi High Court, a near-quadrupling of recourse-backed discounted receivables to ₹219.75 crore, and negative operating cash flow of ₹140 crore against a ₹3.26 crore profit.
Key findings
- First-ever qualified audit opinion on a disputed ₹19.61 crore receivable
Critical- Deloitte Haskins & Sells qualified both standalone and consolidated FY2025-26 statements because trade receivables include a disputed ₹19.61 crore balance with no provision or expected credit loss recognized, and the auditor could not determine the required adjustment. This was the first qualification in annual audited results; the prior two years were unqualified with no key audit matters. The auditor's Annexure A on internal financial controls was also qualified, identifying a material weakness in the recoverability assessment of disputed receivables and related ECL provisioning. - ₹81.01 crore customs demand upheld by Delhi High Court, SLP pending
Major- The Principal Commissioner of Customs, Noida issued a show cause notice dated March 5, 2025 proposing recovery of ₹81.01 crore for alleged incorrect AIFTA preferential duty benefits on copper imports from Vietnam during 2020-2023. The Delhi High Court disposed of the company's writ petition on April 28, 2026, upholding the notice's validity, and the company filed a Special Leave Petition before the Supreme Court after year-end. - Recourse-backed discounted receivables nearly quadrupled to ₹219.75 crore
Major- Trade receivables discounted with banks but not derecognised rose to ₹219.75 crore as at March 31, 2026 from ₹60.28 crore a year earlier, with banks retaining recourse if receivables are unpaid at maturity. Net debt-to-equity rose from 0.25x in FY24 to 0.72x in FY26, while working capital days climbed from 45 to 91. - Operating cash flow of ₹-140 crore against PAT of ₹3.26 crore
Major- FY2025-26 CFO was ₹-140 crore against PAT of ₹3.26 crore, a CFO/PAT ratio of -42.81x. Cumulative CFO of ₹186 crore covered only 0.31x of cumulative EBITDA of ₹601 crore over the seven-year history. Interest coverage was 0.92x in the latest period, and ROCE declined from 9.38% in FY2024-25 to 4.18% in FY2025-26. - Loans to Epavo Electricals rose to ₹23.78 crore; stake lifted to 50%
Major- Epack advanced a further ₹3.5 crore loan to Epavo during FY2025-26, bringing total loans to ₹23.78 crore, all at 10% per annum. A ₹14.35 crore rights subscription during FY2024-25 lifted the stake from 26% to 50%, making Epavo a joint venture effective September 30, 2024. The MD & CEO sits as a director of Epavo, yet the Board's Report states no material related party transactions occurred and Form AOC-2 is not applicable. - Revenue fell 13% in FY26; PLI grant income rolls off in FY27
Major- Operating revenue fell from ₹2,170.9 crore in FY2024-25 to ₹1,894.5 crore in FY2025-26, attributed to a "temporary industry wide transition year". Revenue from the largest external customer fell from ₹852.73 crore to ₹566.05 crore. The MD confirms FY27 is the last year of PLI benefit and the company has "already started rolling back the PLI discounts". - Profits shaped by policy-driven income and accounting reclassifications
Major- In FY2026, Epack recognised ₹21.77 crore of incentive income under the RIPS 2019 to RIPS 2024 transition, effective February 15, 2022, after obtaining the entitlement certificate on May 18, 2026. In Q1 FY27, the CFO re-based the prior-year EBITDA margin to 6.4% from the reported 8.24% to claim like-to-like improvement. During FY2024, CCPS amendments reclassified ₹320 crore from financial liabilities to equity with no gain or loss on derecognition. - GST search led to ₹1.8 crore voluntary deposit; 2023 income-tax search closed without adjustment
Minor- The State Tax Department Uttarakhand searched Epack's Selaqui premises on August 29, 2025, and the company made a voluntary deposit of ₹1.8 crore. A notice followed on November 27, 2025; a written submission was filed on February 4, 2026, and an order was awaited as of the annual report. The November 2023 income-tax search on associate Epavo was completed without any adjustment to the return of income filed. - Goodwill balances small and stable
Clean- Goodwill of ₹2.02 crore from the EPACK Components acquisition was impaired by ₹1.56 crore in FY2021-22 before the subsidiary merged via NCLT order dated May 2, 2024. Investment in Epavo includes goodwill of ₹4.41 crore as of FY2025-26, which management stated is "good and recoverable" given commercial production and expected synergies.
What to watch
- Supreme Court adjudication. The Special Leave Petition against the Delhi High Court order upholding the ₹81.01 crore customs notice was filed after year-end FY2025-26.
- Disputed receivable resolution. Any provision or ECL recognition on the ₹19.61 crore disputed balance in subsequent reporting periods, as disclosed in the FY2025-26 Annual Report.
- GST notice outcome. An order or hearing on the November 27, 2025 notice from the State Tax Department Uttarakhand was awaited as of the FY2025-26 annual report.
- Income-tax appeal. CIT(A) adjudication of the appeal against the original ₹29.03 crore AY 2023-24 demand, now rectified to ₹5.89 crore.
- Auditor re-appointment. Shareholder vote on Deloitte Haskins & Sells' second five-year term at the 7th AGM, as proposed in the FY2025-26 Annual Report.
Bottom line: This is a record with a clean goodwill position and a disclosed, approved related-party loan book, but the first-ever qualified opinion, a material weakness in controls, and negative operating cash flow against a thin profit mark a genuine turning point. The risk character is one of deteriorating earnings quality and rising recourse obligations, with the disputed receivable and the customs demand as the two concrete flashpoints. Watch how those two resolve, and whether the internal-control remediation takes hold.