GRP Ltd’s record carries eight years of unqualified audit opinions and no CARO fraud or wilful-defaulter flags, but three things demand attention: a voluntary accounting change inflated FY25 revenue and profit by ₹21 crore, free cash flow has been negative for three straight years while dividends were paid from borrowed money, and quarterly bank statements have carried unexplained differences for at least four consecutive years.
Key findings
- A voluntary EPR accounting change inflated FY25 revenue and profit by ₹21 crore
Major- The Group switched its EPR credit policy from recognition on actual sales to accrual basis in FY25, adding ₹21.36 crore to revenue, profit before tax, and other current assets. In FY26, an EPR accrual of ₹23 crore was removed from FY25 total income because it belonged to an earlier period. Management confirmed that ₹21.4 crore of prior-period accruals were booked in Q4 FY25 alone, with full-year EPR income falling from ₹43.4 crore in FY25 to ₹20.2 crore in FY26. - Free cash flow is negative for three straight years while dividends are paid
Major- Free cash flow was negative in FY24 (₹-30.10 crore), FY25 (₹-18.01 crore), and FY26 (₹-16.04 crore) even as profit after tax stayed positive [SQL]. The Board paid dividends of ₹37.50, ₹14.50, and ₹3.50 per share across those same three years. Net debt to EBITDA stood at 5.1x, with gross borrowings of ₹208 crore against standalone cash of ₹0.66 crore as at FY26 [SQL]. - Quarterly bank statements carry unexplained differences for at least four years
Major- The auditor’s CARO report for FY26 states that quarterly returns of current assets filed with banks on the security of current assets had differences, and a reconciliation summary is provided. This finding has appeared in every annual report from FY22 through FY26. Separately, the PROPARCO ECB of €7.5 million (₹77.27 crore net) is repayable in 11 half-yearly instalments starting only from 15 June 2027, so no principal falls due in FY26 or FY27. - Unsecured loans to a wholly owned subsidiary stood at ₹8.53 crore with no repayment schedule
Minor- GRP Ltd had an unsecured loan outstanding of ₹8.53 crore to GRP Circular Solutions Limited as at 31 March 2026, repayable on demand with no repayment schedule stipulated. The auditor stated they were unable to comment on the regularity of repayments or whether loans were renewed or extended. A corporate guarantee of ₹12.5 crore was also provided to a bank on behalf of the same subsidiary, against which the outstanding loan in the subsidiary’s books was ₹6.53 crore. - Contingent tax liabilities are a recurring audit key matter, though disclosed amounts are modest
Minor- The auditor has identified contingent liabilities from uncertain tax positions as a Key Audit Matter in every annual report from FY21 through FY26. Disclosed disputed amounts include ₹1.19 crore of Income Tax dues for AY 2017-18 pending before the ITAT, and 14 items each of ₹0.50 lakhs across Income Tax, Excise Duty, and VAT. A corporate guarantee of ₹12.50 crore was issued to Kotak Mahindra Bank on 10 July 2024 to secure a loan for the wholly owned subsidiary. - Statutory auditor changed on schedule after completing maximum term
Clean- The statutory auditor changed from DKP & Associates to Rajendra & Co. at the 48th AGM on 22 August 2022, after the predecessor completed its five-year term. Consolidated audit fees rose steadily from ₹10.85 lakhs in FY22 to ₹26.66 lakhs in FY26. No statutory auditor has resigned during any year covered, and no regulatory action against Rajendra & Co. or its signing partner is recorded in any filing.
What to watch
- FY27 capex outturn. Management targets growth capex of ₹90-100 crore for FY27, as disclosed in the Q4 FY26 earnings call.
- PROPARCO ECB principal. The first half-yearly instalment on the €7.5 million ECB falls due on 15 June 2027.
- Retrospective EPR income. Management expects to book retrospective EPR income from the Pyrolysis business pending government approvals in Q1 or Q2 FY27.
- Subsidiary loan repayment. The ₹8.53 crore unsecured loan to GRP Circular Solutions Limited remains repayable on demand with no stipulated schedule as at 31 March 2026.
Bottom line: This is a disclosed and audited record with no fraud or wilful-defaulter findings across eight years. The risk sits in three places: an accounting change that pulled forward ₹21 crore of EPR income into FY25 and was then reversed, a three-year run of negative free cash flow funded by debt while dividends continued, and quarterly bank statements that have carried unexplained differences for at least four years. Watch whether the FY27 capex programme deepens the cash deficit, and whether the June 2027 ECB instalment is met from operating cash or fresh borrowing.