Two Quarters of Loss at SEPC? Read the Tax Line Before the Bottom Line
SumanSpeaks
Independent Capital Markets & Geopolitical Intelligence
EPC Stock Watch | Deferred Tax
Two Quarters of Loss at SEPC? Read the Tax Line Before the Bottom Line
SEPC Ltd (₹5) earned ₹49.98 crore before tax in the first half of FY27, up from ₹29.85 crore a year earlier. A ₹119.57 crore deferred-tax write-off then turned it into a reported loss of ₹69.59 crore. Here is what that write-off is, and what it is not.
Interestingly, the loss did not come from the underlying EPC operations. It came from the tax line, where the company wrote off tax assets that were close to expiry. So let me put the question every investor should ask before reacting: what exactly is this loss made of? The full numbers are in our 12 November Q2FY27 report. This piece explains the tax line.
| 1 | The Loss Sits Below the Operating Line |
In Q1FY27, SEPC’s consolidated profit before tax was ₹13.17 crore. A deferred-tax charge of ₹24.22 crore then took the result to a net loss of ₹11.05 crore. That pre-tax figure was below the ₹19.05 crore of Q1FY26, so the half-year improvement is a Q2 story.
Q2FY27 followed the same pattern. Pre-tax profit rose to ₹36.81 crore from ₹10.80 crore a year earlier, as costs fell faster than revenue. A deferred-tax charge of ₹95.35 crore then produced a loss after tax of ₹58.54 crore.
Case File | SEPC Ltd, Consolidated
| Period | Pre-tax profit | Deferred-tax charge | Reported result |
| Q1FY27 | ₹13.17 crore | ₹24.22 crore | Loss ₹11.05 crore |
| Q2FY27 | ₹36.81 crore | ₹95.35 crore | Loss ₹58.54 crore |
| H1FY27 | ₹49.98 crore | ₹119.57 crore | Loss ₹69.59 crore |
| H1FY26 | ₹29.85 crore | ₹5 crore | Profit ₹24.85 crore |
One fair point on the revenue side. Revenue from operations in Q2FY27 was ₹230.77 crore against ₹237.42 crore a year ago, a small dip. Lower costs, rather than higher billing, lifted the pre-tax profit this time. Materials, erection and operation costs fell to ₹174.59 crore from ₹195.68 crore, other expenses to ₹6.49 crore from ₹23.80 crore, and finance costs to ₹9.03 crore from ₹11.94 crore. Whether that cost level holds is something Q3FY27 will show.
| 2 | What a Deferred Tax Asset Really Is |
Think of it as a coupon. When a company has made losses in earlier years, the tax rules generally let it set those losses against future profits and pay less tax later. The accounts record that future saving as an asset, called a deferred tax asset.
SEPC carries ₹872.86 crore of business losses forward from its difficult years. These losses can reduce taxable profits in future years, within the limits of tax law. The accounting value of that potential saving is booked as a deferred tax asset, as long as future taxable profit looks likely enough.
Now the catch. Every coupon has an expiry date. Use it before then, or lose it.
| 3 | Why the Company Wrote It Off |
A tranche of ₹190.24 crore of SEPC’s deferred tax assets is due to expire by the end of this financial year. As a matter of prudence, the company charged off ₹119.57 crore of it, ₹24.22 crore in the June quarter and ₹95.35 crore in the September quarter. It calls this a non-cash accounting adjustment, with no impact on cash flow, liquidity or debt servicing.
Put simply, the accountants chose not to count a coupon on the books when it might lapse before it is used. Prudence says: do not show an asset you may not be able to cash.
“A write-off records an expectation. It does not move a single rupee out of the bank.”
THE SUMANSPEAKS VIEW
| 4 | What the Write-Off Does Cost |
I will not call the charge meaningless, because it is not. If the underlying losses lapse unused, SEPC will pay full tax on its future profits instead of a reduced amount. That is a real cost, but it falls in later years, and only if the profits arrive.
The reverse also holds. The company states that the underlying business losses remain available for set-off under tax law, subject to time limits, and that brought-forward losses currently shelter its income from tax. If SEPC earns enough taxable profit within those limits, those losses can still reduce its tax bill, even though the matching asset has been taken off the books. Showing the asset again would depend on the accounting criteria being met. In either case, no cash left the company because of the charge.
| 5 | What Remains on the Books |
After the write-off, the deferred tax asset on carried-forward losses stands at ₹162.31 crore, against ₹281.88 crore at 31 March 2026. Management expects to use ₹91.63 crore before expiry, citing the potential order book, projects in the pipeline and future business plans.
The auditor’s report carries a qualified conclusion on this assessment, and on certain overdue project balances. In plain terms, the auditor could not obtain enough evidence to confirm management’s view on either. The same qualifications appeared in earlier reports, and management states that it is confident of recovery on the project balances. Both are items to follow in coming results.
| 6 | Liquidity, Cash Flow and Promoter Support |
Cash consumption is narrowing. SEPC used ₹47.49 crore in operations during H1FY27, against ₹148.03 crore a year earlier. It closed September with cash and cash equivalents of ₹37.52 crore, against ₹26.18 crore at 31 March.
Incidentally, the promoter has also provided financial support with a face value of ₹220.32 crore. It carries interest of 0.1% a year and is repayable in December 2035. In my view, that is a meaningful funding cushion, though it also shows how much the company has leaned on its promoter.
| 7 | The Order Book Must Deliver Taxable Profits |
A tax asset is worth only what future taxable profit lets it be. That brings the order book into the story. SEPC holds the ₹854.57 crore SAIL Burnpur order, and in Q2FY27 it billed a one-time AED 13.5 million design order for Avenir International Engineers and Consultants LLC, booked as other operating income. The filing does not put a rupee figure on that order, and Q2FY27 includes it, so the half-year is a fairer guide than a single quarter.
Finally, the proposed acquisition of 90% of Avenir has cleared shareholders and the stock exchanges. Lender and other regulatory approvals remain to come.
| 8 | The SumanSpeaks Verdict |
Let me put the question plainly. If a company earns ₹49.98 crore before tax in six months and writes off tax assets that were about to expire, is the reported loss telling you about the business, or about the tax books? In my view, the tax books.
But a good pre-tax line is only the first of three tests. The second is cash: operations still used ₹47.49 crore in H1FY27, though that is well below the ₹148.03 crore of a year earlier. The third is the tax asset itself: the ₹91.63 crore that management expects to use needs enough taxable profit, and the auditor has not been able to confirm that estimate.
SEPC has passed the first test. The other two are the business of the next two quarters. I would change my view if a further write-off follows, if the ₹91.63 crore is not used, or if Q3FY27 margins slide back towards Q1 levels.
| Pre-tax profit | ₹49.98 crore in H1FY27 against ₹29.85 crore a year earlier. The operating side improved. |
| Deferred-tax charge | ₹119.57 crore, non-cash. The cost, if any, falls on future tax, not on cash today. |
| Auditor’s view | Qualified conclusion on the ₹91.63 crore asset and on overdue project balances, carried over from earlier reports. |
| To follow | Use of the remaining ₹91.63 crore asset, project balances, and the Avenir approvals, in the next results. |
In Another Development | Data Centres
In another development, Black Box Ltd (₹900.05) reported that it secured over US$250 million, roughly ₹2,350 crore, in data centre orders in H1FY27. Management points to a substantial pipeline of large hyperscale deals, with significant order wins expected to drive growth in the coming quarters.
The related signal comes from the developer side. Anant Raj Ltd (₹477) operates 28 MW of data centre capacity and targets 63 MW by the end of FY27 and 357 MW by FY32, backed by a ₹20,000 crore Haryana commitment and a ₹4,500 crore Andhra Pradesh plan. It has also proposed to demerge its data centre and cloud business into a separate company. The capex cycle is not a one-company story. It is an industry-wide build-out.
On Black Box, I would watch how quickly orders turn into billed revenue, the margin mix on hyperscale work, working capital as volumes scale, and customer concentration. Strong order momentum is a good start, but order wins are not earnings. The pace of billing will decide how much of them reaches the bottom line.
SOURCES & DATA NOTES: Results for the quarters ended 30 June 2026 and 30 September 2026, as disclosed by SEPC on 11 August and 11 November 2026 and reported by Business Standard, Trendlyne and Multibagg AI. Carried-forward loss and deferred-tax figures follow the SumanSpeaks report of 12 November 2026. The statements on prudence, non-cash treatment, expected utilisation and recovery are the company’s own. Black Box figures are from its Q2FY27 results of 13 November 2026. Anant Raj capacity, investment and demerger details are from its investor disclosures and press reports.
This article is published by SumanSpeaks for general informational and educational purposes only. The author has over 25 years of capital markets experience. This is not a recommendation to buy, sell, or hold any security. Utilisation of deferred tax assets depends on future taxable profits and is subject to the auditor’s qualified conclusion in the results. All data is sourced from public exchange filings, regulatory orders, and credible financial media. Readers must conduct independent due diligence before making any investment decision.
For personalized stock market insights and guidance, feel free to reach out at: sumanm2007s@gmail.com | suman2005s@rediffmail.com
| SumanSpeaks | Estd 2006 | sumanspeaks.blogspot.com |
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