Reliance Infra Stock Falls 5% After Auditors Flag ₹4,705 Cr Recoverability Concerns

Synopsis:-With scrutiny mounting from multiple regulators and its departing statutory auditor, Reliance Infrastructure has reported consolidated net profit of Rs. 2,900.23 crore for FY26  though the headline conceals an underlying operating loss of Rs. 1,701.24 crore before regulatory income, while the outgoing auditor has issued a Disclaimer of Opinion and filed a statutory fraud report under Section 143(12) of the Companies Act.

A leading integrated infrastructure conglomerate released its FY26 annual results on May 23, 2026, in a board meeting that lasted barely 80 minutes, one that also restructured top management, replaced the statutory auditor, and approved a plan to raise up to Rs. 3,000 crore from institutional investors. The results, filed with BSE under Regulation 33 of SEBI’s listing obligations, span the group’s power distribution, toll roads, metro rail, engineering and construction, and defence businesses.

With a market capitalization of Rs. 2,618 crore, the shares of Reliance Infrastructure were last trading at Rs. 64.08 per share, down 5 percent from its previous close of Rs.67.45.

FY26 Results: Regulatory Income Does the Heavy Lifting

On a consolidated basis, revenue from operations for FY26 came in at Rs. 20,440.53 crore, down 13.4 percent from Rs. 23,591.88 crore in FY25. The Power segment, which accounts for the dominant share of group revenues, saw consolidated segment revenue fall from Rs. 28,120.97 crore to Rs. 23,253.55 crore year-on-year. Net profit attributable to owners stood at Rs. 2,900.23 crore, against Rs. 4,937.52 crore in FY25, a 41 percent decline.

These numbers warrant a layer of unpacking. Before regulatory income, the group recorded a pre-exceptional operating loss of Rs. 1,701.24 crore for FY26, against a pre-regulatory operating profit of Rs. 958.41 crore in FY25, a deterioration of over Rs. 2,650 crore. Regulatory income of Rs. 4,964 crore, recognised by the Delhi distribution subsidiaries BSES Rajdhani and BSES Yamuna under Ind AS 114, is what converts an operating loss into a reported profit. The cumulative regulatory deferral balance on the consolidated balance sheet now stands at Rs. 34,728.39 crore  equivalent to nearly 49 percent of total assets  and its eventual recovery hinges on Supreme Court and APTEL proceedings that remain sub-judice.

Exceptional items added Rs. 1,033.47 crore net for the full year, including a Rs. 1,562.77 crore gain on loss of control over Dassault Reliance Aerospace Limited and proceeds from the resolution of GF Toll Road Private Limited under the insolvency process, partially offset by impairment provisions across airport SPVs, toll road entities, and intercompany exposures.

Total consolidated debt stood at Rs. 4,803.83 crore as of March 31, 2026, down from Rs. 6,292.61 crore a year earlier, a genuine improvement, though the group’s other financial liabilities and trade payables remain substantial.

The Auditor Exit: Disclaimer of Opinion and a Fraud Filing

The more material disclosure accompanying these results is the audit opinion itself. Chaturvedi & Shah LLP did not issue a qualified opinion; it issued a Disclaimer of Opinion, a finding that sits above a qualification in severity and means the auditor was unable to form any view at all on whether the financial statements present a true and fair picture. Three issues drove this position.

First, the company holds economic rights in shares and securities of Odisha Discoms and certain unlisted entities, carried at a fair value of Rs. 4,705.74 crore. The auditors stated they could not determine the overall recoverability of these rights and therefore could not assess the consequential impact on the results.

Second: the Enforcement Directorate has provisionally attached 37 immovable properties owned by the company, along with its shareholding in BSES Rajdhani, BSES Yamuna, and MMOPL, and placed a Rs. 77.86 crore lien across 13 bank accounts. SEBI separately issued a Show Cause Notice in September 2025, alleging violations of fraud and unfair trade practices regulations. SFIO contacted the company in November 2025 seeking information. The auditors reviewed the SEBI SCN and concluded that its allegations  relating to suspected fraud in the utilisation of funds through a related entity, CLE Private Limited  warranted a statutory fraud report. They filed Form ADT-4 under Section 143(12) of the Companies Act with the Ministry of Corporate Affairs in January 2026, while simultaneously intimating their intention to resign on completion of the FY26 audit.

Third, MMOPL  operating the Mumbai Metro One corridor  recorded a net loss of Rs. 1,276.68 crore for FY26. Its net worth is negative at Rs. 3,956.66 crore, and current liabilities exceed current assets by Rs. 5,895.59 crore. NARCL, which acquired the lender debt, is seeking initiation of CIRP before the NCLT, and no restructuring agreement has been finalised.

Business Overview

Reliance Infrastructure Limited, operates across power generation, transmission and distribution, engineering and construction, toll roads, metro rail, and the defence sector through a network of subsidiaries and associates.

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