Nova Iron & Steel reported a consolidated net loss of ₹1,596.91 lakh for FY26, widening from a profit of ₹14,879.22 lakh in the prior year. In a material post-balance sheet development, the company has discontinued its manufacturing operations and commenced trading in finished goods following the termination of its lease agreement and disposal of remaining capital work-in-progress.

The Board approved the audited results on September 9, 2026. Statutory auditors MNRS & Associates issued a qualified opinion, citing significant concerns over the company’s ability to continue as a going concern, unconfirmed balances, and regulatory non-compliance regarding asset disposals.

Financial Performance

Revenue from operations rose to ₹46,666.07 lakh in FY26, up from ₹41,691.38 lakh in FY25. Despite topline growth, total expenses surged to ₹49,007.74 lakh from ₹43,818.82 lakh, resulting in an operating loss before exceptional items of ₹2,215.61 lakh.

Exceptional items contributed a further loss of ₹1,223.25 lakh. After accounting for deferred tax charges of ₹604.55 lakh, the net loss for the year stood at ₹1,596.91 lakh. In Q4FY26 specifically, revenue grew to ₹13,583.29 lakh from ₹9,470.99 lakh in the same quarter last year, but the segment still posted a net loss of ₹534.79 lakh.

Balance Sheet Stress

The company’s financial position deteriorated sharply. Current liabilities exceeded current assets by ₹10,912.64 lakh as of March 31, 2026. Consequently, the net worth turned negative at ₹-2,101.22 lakh (standalone equity reported as ₹-2,706.48 lakh), down from a negative equity of ₹-1,130.00 lakh in the previous year.

Total borrowings stood at ₹15,210.27 lakh (₹6,066.32 lakh non-current and ₹9,143.95 lakh current). Lease liabilities also spiked significantly, rising to ₹13,300.71 lakh (₹9,340.42 lakh non-current and ₹3,960.29 lakh current) from ₹139.93 lakh in FY25, reflecting the shift to leasing assets after disposals.

Operational Discontinuation

Subsequent to the balance sheet date, the lease agreement with Shree Balaji Steel and Metal Private Limited was terminated on account of breach of conditions. Furthermore, the capital work-in-progress carried in the financial results as at March 31, 2026, was disposed of in enforcement of charge. As a result, Nova Iron & Steel has discontinued its manufacturing operations and commenced trading in finished goods, marking a substantial change in the nature and scale of its operations.

Audit Qualifications and Legal Risks

Auditors raised several critical qualifications:

• Asset Disposal Compliance: The disposal of charged assets to lender Shree Balaji Steel and Metal Private Limited lacked proper SEBI LODR regulatory approvals, though AGM approval was obtained later.
• Unconfirmed Balances: The company failed to provide direct confirmations for trade receivables (₹332.28 lakh), payables (₹185.54 lakh), security deposits (₹171.95 lakh), advances from customers (₹98.00 lakh), and advances to suppliers (₹885.68 lakh).
• Unsecured Borrowings: Confirmations were not facilitated for unsecured borrowings aggregating to ₹6,038.40 lakh. Due to non-availability of loan agreements, auditors could not comment on adjustments required to carrying values or finance costs.
• Investment Valuation: The company did not determine the fair value of investments aggregating to ₹308.66 lakh, resulting in non-compliance with Ind AS 109.
• MSMED Act Compliance: No internal control system was established to identify suppliers registered under the Micro, Small and Medium Enterprises Development Act, 2006.

An application under Section 7 of the IBC filed by M N Corporation for dues of ₹637.11 lakh remains sub-judice. Additionally, provisional attachment orders affecting ₹28.40 crore worth of assets and shares are pending adjudication by the Enforcement Directorate.

What the Numbers Show

The divergence between revenue growth and margin collapse highlights structural distress. While revenue increased by nearly 12%, the company incurred exceptional losses of ₹1,223.25 lakh in FY26 compared to ₹15,808.36 lakh in FY25. This reduction in exceptional loss masked underlying operational inefficiencies, as operating expenses rose faster than revenue, leading to a pre-tax operating loss of ₹2,215.61 lakh. The reliance on leasing previously owned assets—evidenced by the surge in lease liabilities—is driving up fixed costs without corresponding asset ownership benefits. The subsequent termination of this lease and discontinuation of manufacturing signals a fundamental shift from production to trading, likely impacting future revenue stability and margins.

The National Company Law Tribunal (NCLT) Cuttack Bench dismissed the corporate insolvency resolution process (CIRP) application filed by Bhushan Power & Steel Limited against Nova Iron & Steel Limited. The adjudicating authority ruled that the transaction did not qualify as a financial debt under the Insolvency and Bankruptcy Code (IBC), 2016, but was instead part of a broader strategic investment and project funding arrangement.

Ruling on Financial Debt Status

The tribunal examined an unsecured loan agreement dated July 20, 2011, under which Bhushan Power & Steel (BPSL) advanced ₹150 crore to Nova Iron & Steel. The lender claimed a default amount of ₹306.52 crore, comprising a principal outstanding of ₹125.83 crore and interest of ₹180.68 crore as on February 1, 2024.

However, the NCLT found that the loan was intrinsically linked to multiple Memoranda of Understanding (MoUs) executed between the parties and the Government of Chhattisgarh for integrated steel and power projects. The tribunal noted that BPSL had acquired a substantial stake in Nova Iron & Steel, holding 25.65% shareholding as on March 31, 2022, making it a related party.

Key Findings

The adjudicating authority highlighted several factors supporting its decision:

• The loan was designated as "project funding" in BPSL’s balance sheets from FY18 to FY20.
• BPSL wrote off the entire loan amount from its books during the financial year ending March 31, 2020.
• No provision for interest or principal recovery was made by BPSL post-FY20.
• The Serious Fraud Investigation Office (SFIO) investigation report identified the transaction as part of a collusive arrangement involving fund siphoning.

Absence of Enforceable Debt

The tribunal further observed that since BPSL had written off the debt in its financial statements for FY20, no legally enforceable claim existed at the time of filing the petition in April 2024. The Resolution Plan approved for BPSL’s own CIRP in September 2019 explicitly terminated all previous agreements with Nova Iron & Steel unless specifically notified otherwise.

Additionally, the Record of Default issued by the National e-Governance Services Limited (NeSL) stated that "the debt is disputed." The NCLT concluded that without a subsisting right to payment reflected in the lender’s books, the essential ingredients of financial debt and default under the IBC were not established.

What the Numbers Show

The divergence between the claimed default amount of ₹306.52 crore and the complete write-off of the asset in BPSL’s FY20 balance sheet indicates a lack of contemporaneous recognition of the debt as recoverable. While interest accruals pushed the claimed liability more than double the original ₹150 crore disbursement, the lender’s own accounting treatment—classifying it as doubtful and subsequently removing it from assets—undermined the existence of a legally enforceable financial debt required to initiate insolvency proceedings.