Whalesbook
📉 The Financial Deep Dive
The Numbers:
SPA Capital Services Limited reported a robust performance for the third quarter ended December 31, 2025 (Q3 FY26). Total Revenue from operations surged by 35.95% YoY to ₹8.22 Crore, compared to ₹6.05 Crore in the corresponding period last year. Net Profit for the quarter witnessed an impressive 53.68% YoY increase, reaching ₹0.21 Crore from ₹0.14 Crore in Q3 FY25. Consequently, Basic Earnings Per Share (EPS) grew by 54.2% YoY to ₹0.680 from ₹0.441.
For the nine-month period ended December 31, 2025, Total Revenue from operations climbed 46.14% YoY to ₹27.66 Crore, up from ₹18.93 Crore in 9M FY25. However, the Net Profit growth for the nine-month period was more modest, rising by 3.94% YoY to ₹0.40 Crore from ₹0.38 Crore. Basic EPS for the nine months grew by 3.87% YoY to ₹1.29.
The Quality & The Grill:
The company's reported profits and liabilities have come under significant scrutiny due to critical observations in the independent auditor's limited review report by M/s DHANA & Associates. The auditors pointed out that the company has failed to charge interest on certain outstanding loans, amounting to ₹19.41 Lakh for the quarter and ₹58.07 Lakh for the nine months. This, according to the auditors, represents a departure from the accrual basis of accounting, leading to an overstatement of profits and an understatement of loan liabilities by these amounts.
More critically, the auditors noted that SPA Capital Services has advanced loans totaling ₹3.14 Crore to various parties without levying any interest. Under NBFC guidelines, such advances are classified as 'loss assets,' necessitating specific provisions. The company has not made these requisite provisions, which the auditors state results in an overstatement of profits by ₹3.14 Crore and an overstatement of loan assets by the same figure for the period.
Despite these substantial accounting issues and departures from standard accounting practices, the auditors' report concluded that their conclusion on the financial results was "not modified." This discrepancy between the identified accounting problems and the unmodified opinion is a significant point of concern for investors, raising questions about the true financial health and reporting integrity of the company.
Risks & Outlook:
The primary risk stems from the accounting practices highlighted by the auditors. If these issues lead to regulatory action or require retrospective adjustments, it could significantly impact the company's reported financials and investor confidence. Furthermore, the absence of any forward-looking guidance from the management offers no clarity on future performance or strategies to address these accounting concerns.
Investors should exercise extreme caution and closely monitor any further disclosures or actions related to these audit findings. The company's adherence to NBFC norms and the transparency of its loan portfolio are key areas to watch.