Ratnaveer Precision Engineering Ltd Forensic Report - SOIC x StockScans Report

as of Sep 2026

Ratnaveer Precision Engineering's FY26 record carries three consecutive clean audit opinions and a stable, long-tenured auditor, but the underlying picture is more demanding. Operating cash flow turned sharply negative against rising profit, the company capitalised large self-generated R&D and dies/tools, receivables ballooned far faster than revenue, and related-party dealings with the promoter/MD exceeded ₹85 crore in a single year. The borrowing ceiling has tripled to ₹1,500 crore, and a persistent database-level audit-trail gap in the accounting software has gone unclosed for three years.

Key findings

  1. Operating cash flow turned negative in FY26 despite rising profit Major - Standalone CFO was ₹-48.16 crore in FY26 against PAT of ₹64.31 crore (CFO/PAT -0.75x), reversing from CFO of ₹94.93 crore against PAT of ₹46.82 crore (CFO/PAT 2.03x) in FY25. Management attributed the swing to payments and advances to capex suppliers and depreciation, and said cash flows would improve once capex is capitalised and revenue starts. The company also capitalised ₹39.55 crore of self-generated R&D and ₹83.1 crore of dies and tools in FY2024-25.
  2. Ratnaveer capitalised ₹56.82 crore of self-generated R&D in FY26 Major - The company capitalised self-generated R&D of ₹56.82 crore in FY2025-26, certified by Mr Upendra Nath Mahto vide certificate No UNM/GEN/20/2026-27. This amount is over 88% of the year's PAT of ₹64.31 crore. Management deflected a question on the effective tax rate in the Q4 FY26 transcript, initially saying the analyst's voice was not audible, then guiding 13-15% without commitment.
  3. Related-party dealings with the promoter/MD exceeded ₹85 crore in FY2025-26 Major - The Board's Report for FY2025-26 states there were no materially significant related party transactions with promoters, directors, or KMP, and all RPTs were at arm's length and in ordinary course. Yet Mr. Vijay Sanghavi was allotted 20,27,972 equity shares on 12/12/2025 on conversion of warrants for ₹28,99,99,996, received 1,24,772 preference shares converted on 12/03/2026 for ₹1,84,99,944.44, and the Promoter and Promoter Group were allotted 34,31,446 equity shares on 12/05/2026 on conversion of warrants for ₹54,64,57,775.5.
  4. Ratnaveer carries customs-duty demands and a ₹4.44 crore GST demand Major - On 16 Apr 2025, the Directorate of Revenue Intelligence ordered the company to pay customs duty of Rs. 6.55 crore with interest plus a penalty of Rs. 6.55 crore, with appeal no. C/10017/2025 pending before the High Court. A separate 2019 DRI order confirmed a demand of Rs. 0.41 crore with penalties against the company and its director. DGGI issued a show cause cum demand notice for Rs. 4,44,07,162 regarding ITC claimed for IPO expenses, and the company submitted its reply on 08.03.2025. The company's own largest civil claim of Rs. 4,74,78,148 against S S Automation has the defendant's counter-claim stayed by the High Court.
  5. Receivables ballooned 2.7x against \~20% revenue growth Major - The consolidated auditor's report for FY2025-26 identifies Revenue Recognition as the sole Key Audit Matter. Management states receivables increased from ₹65 crore to ₹175 crore while revenue grew \~₹100 crore, attributing this to new product launches, new customer networks, and credit periods. Trade receivable days increased from 27 days in FY25 to 60 days in FY26.
  6. Borrowing authorisation has tripled to ₹1,500 crore while debt is ₹335 crore Major - Shareholder borrowing authorisation rose from ₹300 crore to ₹500 crore, then to ₹900 crore, and a further increase to ₹1,500 crore is proposed at the AGM to be held on 26 September 2026. Reported total borrowings at FY26 were ₹335 crore, against a shareholder-approved ceiling of ₹900 crore in force during FY26. The working capital facilities are secured by a first charge on the residential property of Director Shri Vijay Sanghvi, hypothecation of his key-man insurance, and his personal guarantee.
  7. Three clean audit opinions, but a persistent database-level audit-trail gap Major - M/s Pankaj R. Shah & Associates issued unqualified opinions on the standalone Ind AS financial statements for FY2025-26, FY2024-25 and FY2023-24. The audit trail feature was not enabled at the database level for accounting software Tally in all three years; it was enabled only at the application level, with management stating database-level enablement consumes disk storage and impacts performance. In FY2023-24, the auditor stated it was unable to express an opinion on whether the edit log facility operated throughout the year.
  8. Promoter control is being reinforced through family appointments and warrant issuances Major - Mr. Vijay Ramanlal Sanghavi held 53.54% as of the FY2023-24 postal ballot notice dated 1st February 2024, while promoter and promoter group holding stood at 45.49% as of the FY2025-26 snapshot. Mrs. Seema Vijay Sanghavi, wife of the Managing Director, was appointed as Additional Director designated as Executive Director on 28th April 2026. The Company issued and allotted 72,32,704 convertible warrants on preferential basis to promoter and promoter group, outstanding as on 31st March 2026.
  9. Auditor appointments are routine and stable Clean - M/s. Pankaj R Shah & Associates was appointed as Statutory Auditor for a first term of four years at the AGM held 29th September 2022, and is proposed for re-appointment for a second term of 5 consecutive years. No change in Statutory Auditor occurred in the three years preceding the Letter of Offer dated 26th Aug 2026. Statutory auditor fees were ₹4,95,000 excluding GST in FY2023-24, rising to ₹5,50,000 excluding GST in FY2024-25 and FY2025-26.

What to watch

Bottom line: This is an audited record with clean opinions and a stable auditor, but the cash conversion, capitalisation choices, and related-party flows all point in one direction: reported profit is being supported by accounting policy and promoter-linked transactions. The risk is concentrated in whether the capitalised R&D and the stretched receivables convert to cash, and how much further promoter control is reinforced. Watch the AGM votes, the fundraise, and the FY2026-27 disclosures on the ₹56.82 crore capitalised R&D.