Financial Shenanigans
Financial Shenanigans
Figures converted from Indian rupees at historical FX rates — see data/company.json.fx_rates. Ratios, margins, and multiples are unitless and unchanged.
1. The Forensic Verdict
The accounting picture is Elevated risk — score 58/100. The income statement and the cash flow statement disagree by a wide and widening margin: cumulative reported profit over FY2022-FY2026 is $1.66M but cumulative operating cash flow is only $0.49M, a 29% conversion that gets worse the longer you measure it. Receivable days have climbed from 47 (FY2023) to 144 (FY2026) while inventory and "other assets" have absorbed roughly $4.4M — more than the entire IPO raise. There is no auditor qualification, no restatement, no related-party concentration above the 10% disclosure trigger, and no SEBI action; what looks bad is the quality of reported earnings and the durability of the working-capital build, not a misstatement. The single data point that would most change the grade is two clean quarters of cash collections that pull debtor days back below 100 — without that, the FY2026 swing to a $0.02M net loss and a negative $0.16M CFO will be hard to label "one-off."
Forensic Risk Score (0-100)
Red Flags
Yellow Flags
CFO / Net Income (5-yr)
FCF / Net Income (5-yr)
Accrual Ratio FY25
FY26 Debtor Days
Grade: Elevated
Headline finding. Five years of reported profit add up to $1.66M. Five years of operating cash add up to $0.49M. The $1.17M gap sits in receivables, inventory, and other current assets — a working-capital story rather than a manipulation story, but the trajectory has worsened every year since the November 2024 IPO.
The 13-shenanigan scorecard
The scorecard concentrates risk in three places: cash conversion (#5, #11), aged receivables (#1), and KPI framing (#12, #13). It is clean on bogus revenue, acquisition accounting, big-bath behavior, and capex shifting — those usually drive the biggest forensic frauds and they are not present here.
2. Breeding Ground
The conditions around the financial statements amplify the cash-quality concern. Onyx is a freshly listed SME with concentrated promoter control, a small statutory audit firm, regulatory disclosure thinner than a main-board name, and one episode where the exchange already asked for clarification on the very thing investors paid attention to — IPO proceeds.
Promoter control has not moved a single basis point since listing; FIIs have walked out the door. That asymmetry — combined with an SME-listed disclosure regime that exempts the company from quarterly results, Ind-AS, and full corporate governance — is the breeding-ground signal that amplifies every cash-quality flag in the next section. Investors should treat anything management chooses not to disclose as the most informative datapoint they have.
3. Earnings Quality
Reported earnings have looked clean and growing through FY2025 — and then collapsed in FY2026. The trouble is that even during the "good" years, profit was not converting to cash, and the FY2026 break is what happens when an inflated receivable book is finally combined with margin pressure.
The OPM line is the tell. Margin expanded steadily from 11.4% (FY23) to 16.76% (FY25), then collapsed to 4.89% in FY26 even though revenue grew 12%. Margins in this business — sterile water for injection, dry powder injections — are set by raw-material spreads and asset utilization. A 12-point margin reset in 12 months without an asset write-down or restructuring charge says the FY24-FY25 margins were not durable. The MD&A in the FY25 annual report frames FY25 as "exceptional performance" without flagging that the line items driving it would not repeat.
Revenue vs receivables — the headline test
Between FY2023 and FY2026, revenue grew 76% but implied receivables grew 441%. Customer collection went from 47 days (FY23) to 144 days (FY26) — three pharmaceutical-cycle quarters of trust extended to top-10 customers who account for 71-82% of revenue. The disclosure is consistent with the underlying B2B contract-manufacturing model (Sun Pharma, Mankind, Aristo, Hetero, Macleods, Dr Reddy's, Macleods, Reliance Life Sciences) where large buyers dictate payment terms — but it should not extend without a corresponding bad-debt provision movement, and that provision is not visible in the SME-AR disclosure.
Other income — IPO-cash interest dressed as operating uplift
Other income jumped from $0.02M (FY24) to $0.14M (FY25) — a 9x increase. Almost all of it ($0.12M) landed in H1FY25, the first reporting period after the November 2024 IPO when $3.50M in net proceeds sat on the balance sheet earning interest. The FY25 PBT was $0.76M, so other income contributed 18% of PBT. Strip out the excess vs the FY24 baseline and PBT growth was 21%, not the 44% the headline suggests.
Soft assets are inflating
"Other assets" — the screener.in roll-up of trade receivables, inventory, advances, prepaid expenses, and miscellaneous current assets — grew 236% between FY22 and FY26 while revenue grew 55%. The SME-AR disclosure regime does not require the line item to be broken down at quarterly cadence, so investors cannot see which sub-category is leading. The next annual report should be read line by line to identify whether the build is receivables (collection slip), inventory (sales slowdown), or advances/prepayments (something else).
4. Cash Flow Quality
This is the single most important section of the memo. Operating cash flow has lagged net income every year, and the gap is structurally driven by working capital — not one-off timing.
Reading the chart: net income (blue) is the smoothest series. CFO (green) is consistently lower and turns negative in FY26. FCF (red) is negative in four of five years including the latest. The FY23 FCF gap of -$2.53M is the Unit II capex; the FY25 modest FCF positive is the IPO year (low capex, plus the working-capital cycle had not yet snapped). FY26 is back to deep negative.
The FY26 spike to 7.14x is not a quality signal — it is the artifact of both CFO and NI being near zero/negative. The defensible reading is the five-year average: $0.49M CFO / $1.66M NI = 0.29. A healthy industrial business converts 80-110%; a sterile injectables CDMO with stable customers should sit closer to 100%. At 29%, two-thirds of every reported dollar of profit has stayed inside working capital rather than reaching the bank.
Working capital mechanics
Red flag — unsustainable CFO booster (#11). From FY22 to FY25, payable days expanded from 59 → 156. The 97-day lengthening means Onyx is taking three additional months to pay suppliers compared with four years ago. That supplier financing is the only reason CFO printed positive in FY24 and FY25. If suppliers normalize collection terms — typical when a small buyer's leverage is questioned — CFO becomes negative without any change in operations. FY26 partially started that normalization (DPO contracted from 156 to 125 days) and CFO immediately turned negative.
Cash conversion gap — the cumulative picture
Across five years the company reported $1.66M in net profit. The income side of the cash flow statement (CFO before financing) delivered $0.49M. After capex, FCF is negative $3.90M — funded entirely by the IPO and bank borrowings. The financial statements are internally consistent (no plug, no balance-sheet error); the problem is that reported "earnings" describe accounting, not economics.
5. Metric Hygiene
The metrics management chose to highlight in the FY25 Director's Report were: Revenue +15.26%, PAT +36.32%, EBITDA $1.35M, Current Ratio 1.91, Debt-Equity 0.22, ROCE 11.88%. The metrics it did not foreground were CFO $0.17M, FCF $0.22M (after IPO-funded capex pause), debtor days 119, and the fact that $2.30M of incremental "other assets" had been added during the year.
The metric hygiene is medium quality: management is not lying with definitions (no non-GAAP earnings number, no adjusted EBITDA exclusion games, no custom "cash earnings" label), but the selection bias is heavy. Every metric foregrounded in the FY25 annual report was a peak metric; the metrics that would have prepared an investor for FY26's collapse — DSO trend, FCF history, EBITDA-to-CFO conversion — are derivable from the financial statements but not surfaced.
6. What to Underwrite Next
The forensic verdict is not "do not invest" — it is "do not value Onyx on reported earnings." The accounting risk here is a valuation haircut and a position-sizing limiter, not a thesis breaker. Five specific items would change the grade in either direction.
Closing read. Onyx Biotec is a small, recently listed contract manufacturer where the forensic risk is not fraud but cash quality. Five years of profits have produced 29 cents of cash on the dollar, working capital has absorbed an amount roughly equal to the entire IPO raise, and management's disclosure regime — NSE SME, no quarterly results, no Ind-AS, condensed governance — gives investors fewer instruments to monitor change between annual reports. The right response is to size positions for a business that might be earning what it reports rather than one that clearly is, demand a higher margin of safety against book value ($0.33 per share at FY26-end versus a $0.33 market price gives essentially zero discount), and re-underwrite at the next annual report once the FY26 line items are visible at note level. If the FY27 first half shows DSO under 100 days and CFO at least 70% of net income, this report should be reread; if either fails, the grade moves to High.