Royal Arc Electrodes' record carries a clean audit opinion and no promoter share pledges, but governance signals are mixed: the company has seen two auditor changes in under two years and has announced a third without naming the new firm, cash conversion has been weak for several seasons, and the promoter directors are asking shareholders to approve salaries of up to ₹15,00,000 a month each even if the company makes no profit.
Key findings
- Two auditor changes in under two years, the latest without a stated reason
Major- M/s Bagadiya & Jain resigned as statutory auditors on 28 October 2024, midway through FY2024-25. M/s J.H. Gandhi & Co. were appointed to fill the vacancy on 31 October 2024 and then approved for a five-year term through FY2029-30. On 19 May 2026 the company announced another auditor change without naming the new firm or giving a reason. - Operating cash flow consistently trails profit, and free cash flow turned negative in FY25
Minor- Over the seven years through FY26, cumulative operating cash flow of ₹46 crore covered only 0.64 times cumulative EBITDA of ₹72 crore. In FY26, cash from operations was ₹7.53 crore against a profit of ₹10.05 crore, a conversion of 0.75 times. Free cash flow slipped to negative ₹3.61 crore in FY25 from positive ₹0.54 crore in FY24, while capital work in progress rose to ₹5 crore in FY26 from ₹2 crore in FY25 and the Board resumed dividends totalling about ₹55.50 lakh after paying none in FY25. - Promoter shareholding declined between 1 April 2024 and 31 March 2025
Minor- The AGM notice for FY2025-26 proposes re-appointing Bipin Shantilal Sanghvi, Hardik Bipin Sanghvi, and Swagat Bipin Sanghvi for five years from 1 April 2027, each with a maximum basic salary of ₹15,00,000 per month plus perquisites, and the explanatory statement confirms the company will pay this even if there is no profit or profit is inadequate. The Board's Report notes that whole-time director salaries were reduced effective 1 October 2025. Promoter shareholding declined between 1 April 2024 and 31 March 2025, with Bipin Sanghvi's stake falling from 9.60% to 6.50% and Hardik Sanghvi's from 28.85% to 21.17%, and no shares were pledged. - A ₹33.46 lakh GST show-cause notice remains unresolved, while prior litigation exposure was cleared
Minor- Contingent liabilities from pending litigations fell from 1.3 crore at 31 March 2024 to nil at 31 March 2025. A show-cause notice under the CGST Act for FY2019-20 involving ₹33.46 lakh is still in progress, with the liability not yet ascertained as of the FY2025-26 reporting date.
What to watch
- New auditor appointment. The company must disclose the name of the new statutory auditor and the reason for the change following the 19 May 2026 announcement.
- AGM vote on promoter remuneration. Shareholders will vote on special resolutions to approve the five-year appointments and salaries of the three promoter directors from 1 April 2027.
- GST proceedings. The outcome of the ₹33.46 lakh show-cause notice for FY2019-20 has no scheduled date as of the FY2025-26 Annual Report.
Bottom line: This is a disclosed record with a clean audit opinion and no promoter pledges. The character of the risk is governance velocity, auditor churn, a remuneration ask that decouples pay from profit, and a cash-conversion pattern that has run lean for years. Watch the identity and reasoning behind the next auditor, and whether shareholders endorse the promoter salary resolutions.