Paul Merchants Ltd Forensic Report - SOIC x StockScans Report

as of Aug 2026

Paul Merchants Ltd's record carries a clean audit history on its face, seven straight unqualified opinions, but the numbers underneath tell a different story. The consolidated entity lost ₹9.78 crore while the sole material unlisted subsidiary booked a ₹269 crore profit driven by a slump-sale gain the principal auditor never audited. Promoter-family pay rose to ₹3.60 crore annually as profits turned negative, and cumulative operating cash flow covered only 0.34 times profit over nine years.

Key findings

  1. Subsidiary's ₹269 crore profit masks a consolidated loss, unaudited by the principal auditor Critical - Paul Merchants Finance Pvt Ltd, the sole material unlisted subsidiary, reported FY2025-26 net profit of ₹269.24 crore, up from ₹57.06 crore, including a long-term capital gain on the slump sale of its gold loan business. Consolidated PAT was ₹-9.78 crore versus standalone PAT of ₹12.62 crore, a 229% variance at subsidiaries. The principal auditor did not audit this wholly owned subsidiary, with total assets of ₹622.54 crore and net profit of ₹269.18 crore, basing the opinion solely on other auditors' report. Parent guarantees for subsidiary credit facilities peaked at ₹1,187.3 crore as on 31.03.2025, then fell to Nil as on 31.03.2026.
  2. Seven years of unqualified opinions with the same unresolved title defect and a growing audit-coverage gap Major - Rajiv Goel & Associates issued unqualified opinions on both standalone and consolidated financial statements for FY2025-26, with no Key Audit Matters, qualifications, or modified opinion. The auditor has done so every year from FY2019-20 through FY2025-26, across two different audit firms. The same Mumbai property title defect, conveyance deed not executed because the developer's board was superseded under IBC 2016, has been reported in every CARO report from FY2021-22 through FY2025-26, without qualifying the opinion. The unaudited-by-principal-auditor subsidiary's assets grew from ₹26.34 crore (FY2020-21) to ₹622.54 crore (FY2025-26).
  3. Promoter family controls board and remuneration, with MD pay rising to ₹3.60 crore as profits turned negative Major - MD Rajneesh Bansal's salary rose from ₹1.44 crore plus ₹85 lakh commission in FY2021-22 to ₹3.60 crore in FY2025-26, while standalone PAT fell from ₹44.00 crore (FY23) to ₹-9.78 crore. His remuneration was approved by Special Resolution for five years with a salary range of ₹4-8 crore per annum, payable irrespective of profits. The subsidiary paid one-time special incentives of ₹5 crore each to Mrs. Sarita Rani Bansal and Mr. Rajneesh Bansal, ₹5 lakh to Mrs. Aastha Bansal, and ₹15 crore to Chairman Sat Paul Bansal during FY2025-26 for the slump sale.
  4. Operating cash flow has not backed reported profits over nine years, with no dividends paid for five years Major - Cumulative CFO was only 0.34x cumulative (PAT − other income) over nine years, and raw CFO/PAT was 0.27x. Other income was 140.1% of PBT in the latest period. No dividend was recommended for FY2025-26, FY2024-25, FY2023-24, FY2020-21, and none was paid during FY2022-23. Meanwhile, the subsidiary upstreamed dividends: ₹2.33 crore during FY2023-24 and ₹15.01 crore declared September 2, 2025, credited September 4, 2025.
  5. Revenue has halved in two years with the core forex business shrinking every year since FY23 Major - Revenue from operations fell from 3,328.58 crore in FY2024-25 to 2,055.91 crore in FY2025-26, with forex revenue down from 3,303.46 crore to 2,039.75 crore. Forex segment revenue declined from ₹6,893 crore in FY23 to ₹2,050 crore in FY26, with PBIT margin falling from 0.27% to -0.26%. The auditor identified revenue recognition as a Key Audit Matter for FY2025-26.
  6. Profit recognition is increasingly driven by one-off gains and policy choices rather than operating earnings Major - Consolidated other income rose from 3.26 crore to 40.82 crore, driven by a net gain on sale/fair valuation of investments swinging to 16.96 crore. The subsidiary assigned loans of ₹225 crores, recognizing an upfront gain of ₹5,60,38,581 per Ind AS 109. The company retrospectively reclassified ₹75,44,67,882 from Securities Premium to General Reserve, stated as "entirely neutral". Discontinued operations' other income jumped to 286.58 crore from 1.44 crore.
  7. "No long-term debt" masks subsidiary borrowings secured by parent assets and guarantees across 20 lenders Major - The parent's standalone statements show no long-term debt, yet its properties, tax-free bonds, and fixed deposits were pledged to secure facilities for subsidiary PMFPL from ICICI Bank, SBI, Kotak, IDBI, RBL, and HDFC across FY2019-20 through FY2024-25. Pledged investments declined from ₹32.87 crore in FY2021 to ₹1.14 crore by FY2025. Corporate guarantees covered facilities from at least 20 lenders as of FY2024-25. On 19 February 2026, Infomerics downgraded and simultaneously withdrew the company's credit ratings at its request.

What to watch

Bottom line: This is a record with a clean audit opinion every year, but the substance beneath it is a business in decline whose reported profits are increasingly one-off gains, whose cash flow has not backed earnings for nine years, and whose material subsidiary was never audited by the principal auditor. The risk is concentrated in how profits are recognised and where the debt actually sits. Watch the regulatory outcomes and the second tranche of the slump sale.