MV Electrosystems Ltd Forensic Report - SOIC x StockScans Report

as of Sep 2026

MV Electrosystems' FY26 record is the story of a company that raised IPO money to fix a working-capital gap and then saw that gap widen: revenue fell from ₹62.64 crore in FY25 to ₹49.43 crore in FY26 while operating cash flow swung to a ₹57.55 crore outflow. The audit opinions are clean, but they carry two Emphasis of Matter paragraphs, a significant internal-control deficiency, and a related-party purchase book that spiked to over a third of all purchases in FY25. The governance record is self-reported and voluntarily adjudicated, with no regulator-imposed penalties to date.

Key findings

  1. FY26 collapsed into a ₹12.63 crore loss with operating cash flow of -₹57.55 crore Major - Cumulative operating cash flow was ₹-54 crore against cumulative EBITDA of ₹8 crore over FY23-FY26, a ratio of -6.58x. FY26 CFO was ₹-57.55 crore against a PAT of ₹-12.63 crore, and free cash flow was ₹-75.71 crore, versus ₹3.04 crore in FY25. Management said IPO proceeds were "required mainly for the working capital of the company to scale up operations," and that "the only deficiency was working capital. That is well in place now".
  2. Clean audit opinions carry two Emphasis of Matter paragraphs and a significant IFC deficiency Major - Sanmarks & Associates issued an unqualified opinion dated 23.07.2026, but flagged that no provision was made for interest under Section 16 of the MSMED Act, and that a ₹13.68 crore cash loss in FY2025-26 required a going-concern evaluation under SA 570, which concluded no material uncertainty exists. Annexure B identifies a significant deficiency: the company paid ₹23,11,589 in interest and penalty to statutory authorities, indicating dues were not deposited on time. CARO also notes that inventory of packing material was excluded from current-asset statements to banks.
  3. Related-party purchases spiked to 36.83% of total purchases in FY2025 Major - Related-party purchases rose from 4.05 crore (8.83%) in FY2023 to 13.72 crore (36.83%) in FY2025, before falling to 1.08 crore (10.12%) in the four months ended July 31, 2025. The AGM notice dated September 3, 2026 seeks omnibus approval for related-party transactions with six counterparties, each up to ₹14.5 crores for FY2026-27. Promoter and promoter group loans carry no interest, and a 28.96 crore corporate guarantee for MV Mobility Limited stood as a contingent liability as at March 31, 2023.
  4. Reported borrowings understate reliance on promoter and related-party funding Major - Unsecured related-party loans swung from nil (March 31, 2023) to ₹21.50 crore (March 31, 2024), ₹1.00 crore (March 31, 2025), and ₹21.00 crore (July 31, 2025). Cash credit facilities outstanding rose from ₹119.13 crore to ₹299.49 crore over the same period. Short-term borrowings were ₹40.35 crore of total borrowings of ₹54.97 crore (73%) in FY26, with interest coverage at -3.81x.
  5. Auditor churn immediately before the IPO Major - Jugal Arora and Company resigned as statutory auditor on July 07, 2024, citing the company's intent to appoint a peer-reviewed auditor. Sanmarks & Associates was appointed on September 27, 2024, and later gave consent dated November 27, 2025 to act as an expert in the DRHP. Audit fees fell to ₹0.06m in FY2024 before rising to ₹0.30m in FY2025.
  6. Receivables ageing deteriorated sharply in one year Minor - Trade receivables aged 1-2 years jumped from ₹0.07m (March 31, 2024) to ₹28.28m (March 31, 2025), while the 6-month-to-1-year bucket rose from ₹0.75m to ₹19.76m. Receivable days increased from 43.77 in FY23 to 92.02 in FY24, then 84.93 in FY25, and 76.84 in FY26. The expected credit loss provision was just ₹0.42m as at March 31, 2025.
  7. Family-controlled board with nil non-executive pay and a history of Companies Act non-compliances Minor - Mr. Pankaj Rastogi was appointed Managing Director effective 01-Oct-2025 with gross remuneration of ₹1.26 crore per annum. No remuneration, including sitting fees, was paid to Non-Executive Directors during FY2025-26. The company defaulted on Section 29 of the Companies Act for share allotments to promoters on July 10, 2023 and November 11, 2023, and filed a voluntary adjudication application on November 26, 2025, which remains pending.
  8. Self-reported violations and pending approvals, but no regulator-imposed penalties Minor - The company and its directors filed a suo-moto adjudication application with the Registrar of Companies, covering incorrect board report disclosure, two private placements in FY2014-15 without special resolution, and CCPS/bonus share allotments without complying with Section 29(1A). The company has not obtained registration as principal employer under the Contract Labour Act, and disclosed delayed MSME payments. No penalties, strictures, or orders were imposed by any stock exchange, SEBI, or other statutory authority in the three years preceding the FY2025-26 Annual Report.

What to watch

Bottom line: This is a disclosed and audited record, but the disclosures themselves carry the risk. The company's own filings show a working-capital crisis that IPO proceeds were meant to fix, a related-party purchase book that spiked to over a third of purchases, and an auditor change at the worst possible moment. The governance issues are self-reported and voluntarily adjudicated, no regulator has yet imposed a penalty. Read the cash flow line first, then watch the RPT vote and the adjudication outcome.