MRF Limited received a rectification order reducing a pending sales tax demand for the financial year 2014-15 to ₹36.19 crore. The original demand stood at ₹91.53 crore, marking a significant reduction in the company's immediate tax liability exposure.

The order was passed by the Deputy Commissioner State Tax, Pala, Kerala, on September 30, 2026, and received by the company on October 6, 2026. This decision stems from a rectification application filed by MRF on April 29, 2021, concerning assessments related to export clearances and declaration forms under sales tax regulations.

Background of the litigation

The dispute originated from a Central Sales Tax (CST) assessment for FY15. The matter was previously disclosed by the company on August 14, 2023, as part of ongoing material litigations pending before the Deputy Commissioner, Commercial Taxes, Kottayam. The initial demand of ₹91.53 crore had been a subject of regulatory disclosure for several years prior to this recent reduction.

What the Numbers Show

The rectification order results in a reduction of ₹55.34 crore in the total demand amount. This represents a decrease of approximately 60% from the originally assessed figure. The significant drop suggests that the Deputy Commissioner accepted key arguments presented in the company's rectification application regarding the calculation of tax liabilities on exports during that period.

Next steps

MRF stated that it is currently examining the details of the order. The company indicated that it will take an appropriate decision to challenge the remaining demand of ₹36.19 crore. No further timeline for this potential legal challenge was provided in the filing made under Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

MRF reported a year-on-year decline in standalone net profit for Q1FY27, dropping to ₹474.37 crore from ₹484.23 crore in the corresponding quarter of the previous year. Despite a robust top-line expansion with revenue from operations rising to ₹8,291.56 crore from ₹7,560.28 crore, operating profitability faced pressure due to rising input costs. The Board of Directors approved the unaudited standalone and consolidated financial results on August 11, 2026, alongside the appointment of two new Senior Management Personnel.

Financial Performance Overview

The company’s revenue growth was driven by higher operational activity, yet cost pressures impacted the bottom line. Standalone EBITDA stood at ₹949.06 crore (derived from Total Income ₹8,483.04 crore minus Total Expenses ₹7,858.50 crore and Other Income adjustments), reflecting a margin contraction to 11.44% from 13.68% in Q1FY26. Consolidated net profit also declined slightly to ₹495.35 crore from ₹501.82 crore YoY, while consolidated revenue increased to ₹8,415.50 crore from ₹7,675.64 crore.

Operating Margin Under Pressure

The divergence between revenue growth and profit decline highlights rising input costs. Cost of materials consumed increased significantly to ₹5,824.07 crore from ₹4,597.33 crore YoY. Employee benefits expense also rose to ₹486.01 crore from ₹464.24 crore. These factors contributed to a compression in the EBITDA margin by over 200 basis points. The statutory auditors, M M Nissim & Co LLP and Sastri & Shah, issued a limited review report confirming that the financial statements comply with Ind AS 34 and SEBI Listing Regulations.

Key Highlights

• Revenue Growth: Standalone revenue rose 9.7% YoY to ₹8,291.56 crore.
• Profit Decline: Net profit fell 2% YoY to ₹474.37 crore due to cost pressures.
• Margin Contraction: EBITDA margin narrowed to 11.44% from 13.68%.
• Management Appointments: The Board appointed Mr. Prasanth Puliakottu as Head of Information Technology Services and Mr. Santhosh Mathew as Head of Human Resources & Services, effective August 11, 2026.

What the Numbers Show

The primary driver of the profit decline is the disproportionate rise in material costs relative to revenue growth. While top-line expanded nearly 10%, material costs surged over 26%, indicating potential inflationary pressures in raw materials or changes in product mix. This structural cost increase eroded the operating leverage typically expected from volume growth, signaling a challenging cost environment for the quarter.