TD Power Systems' record carries clean audit opinions across seven years, but the cash cycle tells a different story: operating cash flow has covered only 39% of cumulative EBITDA over a decade, receivables have swollen to ₹742 crore, and the promoter group has sold ₹456 crore of shares while the Managing Director's pay rose 17.7 times after a statutory cap was removed.
Key findings
- Revenue recognition is a standing Key Audit Matter, and receivables have ballooned to ₹742 crore
Major- Revenue recognition for tailor-made generators and motors has been flagged as a Key Audit Matter, an area requiring the most auditor judgement, in every annual report from FY2020 through FY2026. The top 10 customers contributed 84% of consolidated revenue in FY2026, and consolidated net trade receivables reached ₹742.07 crore, pushing receivable days to 146. Revenue recognised from contract liabilities at the start of the year was ₹102.12 crore in FY2026. - Operating cash flow lags profit, while promoter disposals coincide with working-capital build-up
Major- Cumulative CFO of ₹431 crore covered only 39% of cumulative EBITDA of ₹1,093 crore over the ten years to FY26. In FY26, standalone CFO was ₹129 crore against PAT of ₹239 crore, and consolidated cash balances remained flat at ₹198.59 crore as of March 31, 2026, despite the reported profit. Promoters disposed of shares worth ₹456 crore in total, including a ₹207 crore disposal and a ₹152 crore disposal on 22 May 2025. - Promoter MD remuneration rose 17.7× after removal of a ₹5 crore cap, while promoter shareholding halved
Major- Shareholders approved removal of the ₹5 crore cap on Managing Director remuneration effective 1 April 2022. Nikhil Kumar's total remuneration rose from ₹66.00 lakh in FY2021 to 11.67 crore in FY2026, a 17.7× increase. Promoter shareholding fell from 54.33% as of 16 December 2020 to 26.87% as of FY2026, with zero pledge throughout. - Two material overseas subsidiaries are unaudited, and the Indian subsidiary is a dormant shell with a fully impaired investment
Minor- TD Power Systems (USA) Inc. and TD Power Systems Europe GmbH were material subsidiaries by turnover in FY2025 and FY2026, yet statutory auditor appointment is stated as not mandatory under their respective local laws. DF Power Systems Private Limited, the Indian subsidiary, had no operations from FY2021 through FY2024 and earned only ₹5.44 lakhs in revenue in FY2026. Its net worth remains positive solely due to creditor write-backs from earlier years, and its statutory auditor expressed material uncertainty about its ability to continue as a going concern. - The entire ₹20.41 crore investment in the Indian subsidiary has been fully impaired
Minor- The parent company recognised an additional impairment provision of ₹3 crore during FY2025-26, bringing the cumulative provision to ₹20.41 crore as of 31 March 2026, equal to the full carrying value of the investment. The subsidiary's positive net worth as of that date depended solely on write-backs from claims and counterclaims with creditors. The company had earlier recognised an exceptional provision of ₹1.22 crore for its investment in TD Power Systems Japan Ltd, which filed for dissolution in FY2023. - A ₹19.43 crore transfer-pricing demand remains stayed since 2021, and a subsidiary faces a fresh ₹8.25 crore GST demand
Minor- The company has contested an income tax demand of ₹19.43 crore for AY 2017-18 and obtained a stay from the Karnataka High Court on 30 June 2021, with a further stay on a subsequent assessment order on 21 March 2022. Management states an adverse outcome is not probable and no provision has been made. Separately, the Indian subsidiary received an order demanding ₹8.25 crore under the KGST Act for ineligible input credit for the period 2017-18 to 2023-24, and has preferred an appeal. - Recurring exceptional items from subsidiary write-downs and creditor write-backs have been a persistent feature of the income statement
Minor- The company recognised an exceptional provision of ₹3 crore for diminution in the value of its investment in DF Power Systems in each of FY2026 and FY2025. The Indian subsidiary wrote back creditors as exceptional items in four consecutive years: ₹62.78 lakhs in FY2023, ₹7.58 crore in FY2022, ₹7.18 crore in FY2021, and ₹11.89 crore in FY2020. In FY2020, the company adopted the lower tax rate under Section 115BAA and reversed ₹3.25 crore of deferred tax liabilities to the profit and loss statement.
What to watch
- Transfer-pricing demand. Resolution of the ₹19.43 crore income tax demand for AY 2017-18 pending before the Karnataka High Court; next hearing date not disclosed in the FY2026 Annual Report.
- Subsidiary GST demand. Outcome of the subsidiary's appeal against the ₹8.25 crore KGST demand for the period 2017-18 to 2023-24.
- DF Power Systems investment. Recovery or further impairment of the fully provided ₹20.41 crore investment, contingent on resolution of the subsidiary's creditor claims and counterclaims, as disclosed in the FY2026 Annual Report.
- Going-concern uncertainty. Resolution of the going-concern uncertainty at DF Power Systems Private Limited, whose independent auditor expressed material uncertainty as reported in the FY2026 consolidated audit report.
Bottom line: This is a disclosed and audited record with improving return ratios and clean audit opinions. The risk sits in the widening gap between reported profit and cash generation, compounded by extreme customer concentration and a receivables book that has more than quadrupled in five years. The promoter group has reduced its stake by half while the Managing Director's pay has multiplied, and two material overseas subsidiaries operate without statutory audits. Watch the resolution of the ₹19.43 crore tax demand, and whether the planned capex begins to close the cash conversion gap.