Shree Rama Newsprint's record is clean on its face: seven years of unqualified audit opinions and unqualified assessments of internal financial controls. But the auditor has flagged going-concern uncertainty in FY2025-26, and the company's losses are locked in by a standing refusal to recognize deferred tax assets.
Key findings
- Clean opinions mask a going-concern flag and a ₹121.53 crore current-liability gap
Critical- The auditor issued unqualified opinions for every year from FY2019-20 through FY2025-26, but flagged material uncertainty regarding going concern in both FY2024-25 and FY2025-26. Current liabilities exceeded current assets by ₹121.53 crore as of March 31, 2026, following a ₹106.28 crore total comprehensive loss for the year. The FY2025-26 CARO report also disclosed a title deed exception: a 121,302 sq.mt land parcel is subject to a Collector Surat order dated May 1, 2025 to surrender the land for alleged gouchar violation. - A ₹350 crore preference share issuance to the promoter holding company costs ₹35 crore annually
Major- The company issued 3,50,00,000 10% Non-Convertible Cumulative Non-Participating Redeemable Preference Shares to Riddhi Siddhi Gluco Biols Limited (Holding Company) for ₹350 crore in FY2023, redeemable at par after 10 years. Finance costs for FY2024-25 include a ₹35 crore dividend on these NCRPS. Shareholders approved related-party transactions with the holding company for purchase/sale/supply of goods aggregating up to ₹500 crore per annum for 5 years commencing FY2021-22. - Cumulative impairment losses of ₹197.24 crore on the discontinued Paper Division across FY2023-FY2026
Major- Impairment losses of ₹99.84 crore (FY2023), ₹69.56 crore (FY2024-25), and ₹27.84 crore (FY2025-26) were recognized on Paper Division assets per Ind AS 105. No impairment was recognized on continuing operations; impairment testing of plant and machinery in FY2021-22 showed fair value higher than carrying amount. The auditor identified impairment of PPE as a Key Audit Matter in FY2021-22 and found no significant matter. - Regulator actions span a SEBI warning, a CBI court conviction, and a withdrawn IBC proceeding
Major- SEBI issued a warning letter for delayed disclosure of a Gujarat Pollution Control Board closure order dated June 25, 2020; the company disclosed it on August 8, 2020, not within 24 hours as required. A CBI court in Ahmedabad on August 4, 2021 sentenced 5 former employees, including the then Promoter Director, to 3 years imprisonment for alleged document alteration to claim MODVAT credit, even though CESTAT had allowed the claim. NCLT Ahmedabad admitted a Section 9 IBC application on March 16, 2022, but NCLAT ordered withdrawal on April 12, 2022 following a settlement. - Reported debt excludes ₹350 crore of NCRPS, while bank borrowings are secured by pledges of the holding company's own shares
Major- The ₹350 crore NCRPS held by the holding company cost ₹35 crore annually in finance charges but are excluded from reported debt. Loan repayable on demand from banks is secured by pledge of equity shares investment of Riddhi Siddhi Gluco Biols Limited as at 31.03.2026. Non-convertible zero coupon unsecured debentures held by the holding company outstanding ₹30 crore as at March 31, 2025, payable in 3 instalments commencing August 2025. - Operating cash flow has been volatile and disconnected from reported profit
Major- The company reported PAT of ₹1.92 crore and CFO of ₹29.96 crore in FY23, followed by PAT of -₹32.91 crore and CFO of ₹13.19 crore in FY24, PAT of -₹28.61 crore and CFO of ₹9.17 crore in FY25, and PAT of -₹68.54 crore and CFO of -₹1.09 crore in FY26. The auditor identified as a Key Audit Matter capitalised borrowing cost and directly related overheads of ₹12.68 crore towards PM I upgradation in FY2019-20. No dividends were paid across the review period. - A land surrender order was withdrawn in August 2026, while two older tax disputes totaling 6.01 crore remain pending
Minor- The Collector Surat order dated 01.05.2025 requiring surrender of 121,302 sq. meters of land was withdrawn on 14.08.2026 with no financial impact. As of Aug 12, 2023, the company disclosed a Central Excise Act dispute with a claim of 4.71 crore pending before the Commissioner of Excise and Customs, and a Bombay Stamp Act dispute with a claim of 1.31 crore pending before the Gujarat High Court. Shah Paper Mills Limited's Section 9 IBC application was rejected by NCLT on 18.10.2023, with appeals dismissed by NCLAT on 09.09.2024 and the Supreme Court on 13.12.2024. - Losses are locked in by a standing refusal to recognise deferred tax assets
Minor- The company made no income tax provision and recognised no deferred tax assets in every year from FY2019-20 through FY2025-26 due to current year losses, unabsorbed depreciation and brought forward business losses, citing uncertainty regarding availability of probable future taxable profits. Plant and machinery of the paper division was revalued in FY2024-25 with a revaluation change exceeding 10% of net carrying value, amounting to ₹69.56 crore.
What to watch
- 35th AGM. Scheduled for 1st Sep 2026, where Mr. Ganpatraj Chowdhary retires by rotation and offers himself for re-appointment.
- NCRPS redemption. The ₹350 crore 10% NCRPS issued to Riddhi Siddhi Gluco Biols Limited is redeemable at par 10 years from allotment in FY2023, with earlier redemption at issuer's option.
- Land surrender appeal. Outcome of the appeal against the Collector Surat order dated May 1, 2025, pending as of the FY2025-26 audit report.
- Going-concern resolution. Whether the material uncertainty flagged in the FY2025-26 audit report is resolved in the FY2026-27 audit.
- Audit trail remediation. Whether the edit log gap for stock records identified in FY2025-26 is remediated in the FY2026-27 audit.
Bottom line: This is a disclosed and audited record with real cash generation in FY23 but persistent losses since. The risk sits in the promoter channel: a ₹350 crore preference instrument costing ₹35 crore annually, related-party limits repeatedly expanded, and bank borrowings secured by pledges of the holding company's equity shares investment in the company. Watch whether the going-concern flag resolves, whether the NCRPS gets redeemed, and whether the land surrender order withdrawal succeeds.