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McNally Bharat Engineering Company Ltd

| Quarterly Financial Results Q3 FY 2025-26

NEUTRAL SENTIMENT

Report Source

⬤20th Feb 26

Summary : McNally Bharat Engineering is implementing an NCLT-approved resolution plan, extinguishing liabilities, but faces delays, regulatory fines, and reconciliation challenges.

Quarterly Report Analysis & Insights

Financial Disclosures

  1. Cost of materials consumed, outsourcing expenses, employee benefits, finance costs, depreciation, other expenses.
  2. Trade Receivables are subject to confirmation and reconciliation.
  3. Revenue from operations (Net sales/Income from operations and Other operating income).
  4. Bank Guarantees aggregating Rs 25,100 lakhs protected by SRA.
  5. Active Bank Guarantees as at 31st December 2025: Rs 15,366.46 lakhs.
  6. EPFO demands for damages and interest (Rs 564.81 Lakhs and Rs 395.52 Lakhs) are stayed.
  7. Share capital extinguished and cancelled to 95% due to Resolution Plan.
  8. Financial and operational liabilities extinguished, balances credited to Capital Reserve/Retained Earnings.
  9. Trade Receivables, Financial Assets, Other Current Assets, Trade Payables, and Advances from Customers are subject to confirmation and reconciliation.
  10. Both Standalone and Consolidated Unaudited Financial Results are presented.

Corporate Overview

  1. Operates in India, with subsidiaries in Singapore and Zambia.
  2. Delays in implementation of the approved Resolution Plan.
  3. Uncontrollable challenges faced by the SRA.
  4. Inability of SRA to infuse further funds.
  5. Pending listing approval for equity shares allotted to financial creditors.
  6. Regulatory fines for corporate governance non-compliance.
  7. Dependent on Successful Resolution Applicant (SRA) for funding and plan implementation.
  8. Primarily engaged in Construction and Engineering activities.
  9. Factual and compliant, reporting on resolution plan progress and challenges.
  10. Rs. 511.00 lakhs allocated towards Capex and working capital requirements.

Risk Factors

  1. Delays in resolution plan payments.
  2. Uncertainty in asset/liability reconciliation.
  3. Impact of new labor codes.
  4. Ongoing regulatory non-compliance.

Key Drivers

  1. Successful resolution plan implementation.
  2. Equity share listing approval.
  3. Resolution of pending arbitrations.
  4. Improved business performance.

Auditor’s Report

  1. Limited Review, not an audit opinion expressed.
  2. Conclusion not modified regarding emphasis of matters.
  3. Accounting treatment for Resolution Plan implementation.
  4. Current Assets and Current Liabilities subject to confirmation and reconciliation.
  5. Evaluation of impact from new Labour Codes implementation.

Board Commentary

  1. Board reconstituted on 6th January 2025, previous directors ceased office.
  2. Newly constituted Board appointed directors and formed statutory committees.
  3. Delays in resolution plan implementation and payments.
  4. Uncertainty in confirmation of trade receivables and payables.
  5. Impact of new Labour Codes on company operations.
  6. Regulatory fines for corporate governance non-compliance.
  7. Company admitted to Corporate Insolvency Resolution Process (CIRP).
  8. NCLT approved Resolution Plan, with subsequent extensions granted.
  9. EPFO demand for damages and interest, currently stayed by High Court.
  10. SOP Fines from BSE and NSE for corporate governance non-compliance.
  11. Cash payout of Rs. 15,500.15 lakhs under Resolution Plan.
  12. Maximum liabilities towards active bank guarantees: Rs. 25,100.00 lakhs.
  13. Towards Capex and working capital requirements: Rs. 511.00 lakhs.

Corporate Governance

  1. Board reconstituted on 6th January 2025, statutory committees formed.
  2. Statutory committees formed as per Companies Act.
  3. Monitoring Committee (MC) oversees Resolution Plan implementation.
  4. Received SOP Fines from BSE and NSE for corporate governance non-compliance.

Management Discussion & Analysis

Future Strategy

  1. Continue implementation of the approved Resolution Plan.
  2. Seek NCLT directions regarding the put option for financial creditors.
  3. Monitor finalization of New Labour Codes and assess impact.

Operational Focus Areas

  1. Comply with NCLT orders and payment obligations.
  2. Reconcile trade receivables, payables, and other balances.
  3. Address pending regulatory compliances and fines.

Performance Drivers

  1. Implementation of the NCLT-approved Resolution Plan.
  2. Extinguishment of significant financial and operational liabilities.

Risk Control Measures

  1. SRA extended Bank Guarantee protection to lenders.
  2. Company pursuing legal remedies for EPFO demands.

Critical Risks

  1. Delays in resolution plan payments by SRA.
  2. Uncertainty in confirmation and reconciliation of current assets/liabilities.
  3. Impact of new Labour Codes on operations and financials.
  4. Ongoing legal and regulatory issues, including EPFO demands.