THIRUVANANTHAPURAM: The auditors have raised serious concerns over the accounts of Kerala State Electricity Board (KSEB) whose accumulated losses and negative net worth have reached alarming levels.

The auditors have also raised concerns over the valuation and accounting treatment of KSEB's assets, especially the unreconciled deposits, disputed claims, and the recognition of liabilities as well.

More importantly, they have also flagged material uncertainty over the company’s ability to continue as a going concern.

The financial position of KSEB has come under renewed scrutiny after its auditors issued an ‘adverse conclusion’ on the utility's first quarter financial information, flagging a series of accounting and financial concerns that extend well beyond its accumulated losses and large negative net worth.

The state-owned power generator and distributor had a negative net worth of Rs37,885.13 crore as on June 30, 2026, compared with Rs37,621.83 crore at the end of March. Its accumulated losses stood at Rs41,384.18 crore in the same period.

More significantly, the auditors, Mohan & Mohan Associates, have said that the financial information contains material misstatements and that the effects of the matters identified are ‘pervasive’.

The review report also draws attention to conditions that create material uncertainty and may cast significant doubt on KSEB's ability to continue as a going concern.

Current liabilities vs current assets

The auditors have pointed to the negative net worth, accumulated losses and excess of current liabilities over current assets.

However, they have also acknowledged factors that support KSEB's continued operations, including its status as a wholly owned Kerala Government utility company, its position as the state's sole electricity utility, the absence of defaults on financial obligations and regulatory approval to recover accumulated losses through future tariffs.

The going-concern warning is therefore a serious financial and accounting concern, but it should in no way be read as a prediction that KSEB is about to shut down.

KSEB's current liabilities stood at Rs14,167.14 crore as on June 30, 2026, while current assets were around Rs5,740.55 crore leaving a whopping gap of Rs8,426.59 crore.

In other words, current liabilities were about two-and-a-half times current assets. This indicates a substantial working-capital deficit and raises questions about the utility's short-term financial flexibility.

The position does not automatically mean that KSEB is unable to meet its immediate obligations. “Electricity utilities have recurring cash inflows from consumers and may also receive government support,” a financial expert noted.

But the scale of the gap makes liquidity management an important concern, particularly when the board has to meet power purchase bills, salaries, interest and other operating expenses.

Q1 profit at Rs357.99cr

KSEB reported a profit after tax of Rs357.99 crore for the quarter, compared with Rs687.72 crore in the corresponding quarter of the previous year. Revenue from operations increased to Rs6,435.29 crore from Rs5,997.88 crore.

Power purchase expenditure rose to Rs3,452.31 crore from Rs2,997.06 crore, while finance costs increased to Rs1,522.23 crore from Rs1,163.89 crore.

The increase of around 31 per cent in finance costs is particularly noteworthy. KSEB's total borrowings on the balance sheet were Rs14,741.29 crore as of June-end, lower than the Rs15,978.24 crore reported at the end of March.

“The quarterly statement does not provide a sufficient explanation for the sharp increase in finance costs. The reasons could involve the average level of borrowings during the quarter, interest rates, loan composition or other charges, but these need to be established,” said a senior chartered accountant while explaining the accounts to businessbenchmark.news

For a state-owned electricity utility that is expected to invest in new generation, renewable energy, storage and transmission infrastructure, these concerns carry wider implications.

Kerala's proposed power-sector expansion will require substantial capital, while KSEB is already dealing with accumulated losses, a negative net worth and a large working-capital gap.

The board and the government will have to address not only the state's power supply challenge but also the financial and accounting weaknesses highlighted by the auditors.