One in four Indian listed companies does not turn its profit into cash
Reported profit is an accounting number. Cash is what a company can actually spend, repay or pay out. We ran ten mechanical checks on the latest statements of 5,476 actively traded Indian companies, plus a scan of their exchange announcements from the last twelve months. Here is how often each flag appears.
| Flag | Companies | Share |
|---|---|---|
| Weak cash conversion (operating cash under half of profit over 3 years) | 1,430 | 26.1% |
| Profit leans on other income (over 40% of pre-tax profit) | 1,086 | 19.8% |
| High accruals (profit exceeds operating cash by over 10% of assets) | 835 | 15.2% |
| Receivables growing far faster than sales | 782 | 14.3% |
| Share dilution (10% in a year or 25% in three) | 650 | 11.9% |
| Net loss two years running | 631 | 11.5% |
| Inventory growing far faster than sales | 565 | 10.3% |
| Borrowings up 30% while profit fell | 480 | 8.8% |
| Auditor change in the last year | 434 | 7.9% |
| Negative shareholders' equity | 332 | 6.1% |
| Low interest cover on a profitable, indebted company | 316 | 5.8% |
The most common gap is between profit and cash
One company in four reported profits over the last three years that did not show up as operating cash. There are innocent reasons: a fast-growing company ties up cash in receivables and stock, and a contractor waits months for milestone payments. But when profit keeps running ahead of cash year after year, the profit is worth less than it looks, and that is the pattern behind most accounting surprises.
The second flag points the same way. For one company in five, other income (interest, dividends, one-off gains, asset sales) made up more than 40% of pre-tax profit, so the core business earns less than the headline number suggests.
Large companies are not exempt
Among the 585 companies worth Rs 10,000 crore or more, 241 carry at least one flag of "explain" severity or worse. Across all the flags on these large companies, the most frequent are auditor changes (168, mostly routine rotation, which we rate as low severity) and regulator orders (156, also low severity because the filings rarely say what the order was), followed by weak cash conversion in 113 companies.
The clean end
At the other end, 348 companies carry no flag at all and score 7 or 8 on our eight-test F-score, a measure of profitability, cash flow, leverage and efficiency built on Joseph Piotroski's work. 52 of them are worth Rs 10,000 crore or more.
How to use this
A flag is a question, not a verdict. Every company page now has a Red flags card that shows which checks fired and the numbers behind them, and the screener lets you filter on the F-score (fscore >= 7) and the flag total (flags = 0). The exact rules are on the methodology page.
Numbers from statements available on 3 October 2026, actively traded companies only. Data, not advice; see the disclaimer.