How to Read an Annual Report

Where it is. Start from the report the company itself filed, not a news story about it. A listed company files its annual report with the stock exchanges when it starts sending it to its shareholders, at least 21 days before its annual general meeting (AGM). On NSE, the National Stock Exchange of India, it sits in the company's corporate filings under "Annual Reports"; the company's own website has it under Investors. Mahindra & Mahindra: show the note on Mahindra & Mahindra · NSE: M&M filed its report for FY26 with NSE on 4 July 2026. In the US the same yearly filing is the Form 10-K, free on the SEC's website.

Check four things before you read a number: the company's exact name; the year (FY26 here); that it is the filed report, not an extract or a news summary; and the unit (Mahindra reports in ₹ crore).

Two sets of accounts. The standalone statements describe the listed company alone. The consolidated statements describe it together with the companies it controls, its subsidiaries, as one group. Mahindra & Mahindra Ltd itself makes SUVs, pickups and tractors. Its group adds Tech Mahindra, the lender Mahindra Finance, Mahindra Lifespaces, Club Mahindra and Mahindra Logistics.

The same year, two sizes. Income from operations was ₹147765 crore for the company alone and ₹198639 crore for the group, so the company is about three-quarters of the group (derived). Profit was ₹15639 crore for the company alone and ₹18622 crore for the group, of which ₹17099 crore belongs to Mahindra's own shareholders and ₹1523 crore to the other owners of its subsidiaries, called non-controlling interests. The biggest gap is debt: the company alone had borrowed ₹1056 crore, the group ₹129615 crore, about 120 times as much (derived), because the group includes a lender, Mahindra Finance, which borrows to lend. The group's loans to its customers came to ₹140317 crore.

Which to read. Neither is wrong. The consolidated set answers "what does a Mahindra share give me a part of?"; the standalone set answers "how is the car and tractor maker itself doing?". Headlines usually quote the consolidated figures. One trap: the company's own income from operations includes ₹2190 crore of income from its investments in its subsidiaries, associates and joint ventures (companies it owns in whole or in part), which the group's accounts do not count that way, because they already hold those companies' own results. Keep one scope for every comparison.

Maya closes her restaurant's year with her accountant every April. This year, after the last order, she sets her own account book beside something new: the annual report of a listed company, nearly 500 pages long.

Her year in three views, made up for this lesson. What the year earned, in the statement of profit and loss, which covers a period: sales of ₹36 lakh; food and packaging ₹13 lakh, wages ₹9 lakh, rent ₹4.8 lakh, gas, power and delivery-app fees ₹3.2 lakh, and ₹1 lakh for the wear on her griddle, fryer and scooter. That last cost is depreciation: the price of an asset spread over the years it is used. What is left: ₹5 lakh.

What she owns and owes on the last day, in the balance sheet, which is a photograph of one date: the griddle, the fryer, the scooter and the cash she owns; ₹1.5 lakh that an office caterer still owes her; the bills she owes her suppliers; and what is left for the two owners, called equity. What the restaurant owns always equals what it owes plus the owners' part.

Where the cash went, in the cash flow statement, again a period: ₹4.5 lakh came in from running the restaurant, which is the ₹5 lakh profit, plus the ₹1 lakh of depreciation that was never paid out in cash, less the ₹1.5 lakh not yet collected. ₹2 lakh went on a new fryer. ₹2 lakh was paid out to the owners, ₹20000 of it to the new buyer who owns 10%. Her bank balance rose ₹50000.

How they tie. The year's ₹5 lakh profit, less the ₹2 lakh paid out, raises the owners' part on the balance sheet by ₹3 lakh. The cash flow ends exactly at the balance sheet's cash. A listed company's statements tie the same way, with more lines; the notes behind them explain each line, and an auditor checks them.

The route. Each of her questions has a home in a company's report. Is this the right company, year and scope? The cover, the Board's report and the heading of the auditor's report; Mahindra's Board's report sets both sets of figures side by side on page 95. How does it earn? The management discussion and analysis (MD&A) and the segment note: in Mahindra's FY26 report the statutory reports, with the MD&A, start on page 94, and note 44 runs from page 371 to 374. What did the year earn, and what does it own and owe? The statement of profit and loss and the balance sheet: pages 313 and 314 for the company alone, 389 and 390 for the group, with the notes on borrowings, leases and risks behind them. Did profit become cash? The cash flow statement, after each balance sheet. Can I trust the numbers? The notes, and the independent auditor's report: page 303 for the company alone, page 379 for the group.

Who owns it, and who runs it? The corporate governance report holds the shareholding table, the board and its committees, and the exchange has the latest quarterly shareholding pattern. In IndiGo's FY26 report, page 89 shows that its promoters, the group that controls the company, held 41.57% of its shares on 31 March 2026. This lesson finds and reads these answers; judging them is the work of how to research a stock.

Two places tell you how a company earns: the MD&A, management's own account of the year, and the segment note, where the company reports each part of its business separately, with its sales and its segment result, roughly the profit that part made before interest and tax. The MD&A explains; the note gives numbers you can check its explanation against.

Mahindra's standalone accounts have two operating lanes (note 44). Automotive (SUVs, pickups and three-wheelers) had ₹109355 crore of income from operations and ₹10141 crore of segment result. Farm Equipment: show the note on Mahindra's share of India's tractor market, FY26 (tractors) had ₹36409 crore of income and ₹7206 crore of result.

So tractors are a quarter of the two lanes' income but more than two-fifths of their result (derived: 25.0% and 41.5%). Each rupee of tractor sales left about 20 paise of result (a paisa is a hundredth of a rupee); each rupee of car sales, about 9 paise (derived: 19.8% and 9.3%).

Segment result is the company's own measure: profit before interest and tax, and before the corporate costs that no segment carries. It is not profit after tax, so the lanes do not add up to the bottom line.

Margins differ between lanes for reasons the note does not give: prices, costs, competition, new models. Read the MD&A for management's reasons and treat them as its view; whether a lane's margin is good is a question for how to research a stock.

The statement of profit and loss runs in a fixed order: revenue from operations (for an airline, ticket sales), other income (mostly interest on the cash it holds), the year's expenses, then exceptional items (large, unusual items shown on their own), tax, and the profit for the year. It ends with earnings per share (EPS): the profit divided by the average number of shares.

IndiGo: show the note on IndiGo · NSE: INDIGO, for its group in FY26: revenue of ₹84962 crore and other income of ₹4552 crore, ₹89513 crore in all. Expenses: fuel ₹25389 crore; aircraft rentals and maintenance ₹14997 crore; staff ₹8272 crore; airport fees ₹6548 crore; depreciation ₹10808 crore; finance costs ₹5891 crore; other costs ₹8796 crore; and a foreign exchange loss: show the note on rupees for one US dollar on 31 Mar 2026 of ₹8976 crore. Income less expenses: a loss of ₹164 crore (derived).

Then an exceptional item of ₹1796 crore, set aside for India's new labour codes, and tax of ₹433 crore: a loss of ₹2394 crore for the year, or −₹61.88 a share.

On the day of its results, IndiGo also gave another figure: a profit of ₹7503 crore "excluding the impact of foreign exchange and exceptional items". That is the company's own measure. It helps you see the flying business without the currency and the one-off, but it is not a line of the audited statement, and the currency loss is real money in rupees on debts IndiGo owes (chapter 5). Read both, and say which one you quote.

One-offs push both ways. Info Edge, which runs the jobs website Naukri.com, reported a FY26 profit of ₹5536 crore for the company alone, but ₹5200 crore of it came from a rise in the value of shares it holds (chapter 6). Its EPS was ₹85.49 after exceptional items and ₹17.04 before.

A balance sheet always balances: assets (what the company owns or controls) equal liabilities (what it owes) plus equity (what is left for its owners). It is a photograph of one day: show the note on "As at" and "for the year", here 31 March 2026.

IndiGo owned ₹136002 crore in all: ₹52054 crore of right-of-use assets (its right to fly the aircraft it leases), ₹11087 crore of aircraft and equipment it owns, ₹51674 crore of cash, bank deposits and investments, and ₹21187 crore of everything else (lines we grouped together).

It owed ₹75943 crore in lease liabilities: the payments still due on its leased aircraft, counted at today's value. Since April 2019, India's accounting rule for leases (Ind AS 116, which matches the international IFRS 16 of January 2019) puts almost every lease on the balance sheet, as an asset and a matching debt. Everything else it owed came to ₹53072 crore (derived), including ₹5931 crore of provisions and its bills to suppliers.

The owners' part was ₹6987 crore, about 5% of what it owns (derived). That is book value under the accounting rules, not what IndiGo's shares are worth on the market; market capitalisation is that other measure.

The answer to chapter 4. Note 31 shows that ₹74975 crore of the lease liabilities, 98.7% (derived), are owed in US dollars. When the rupee fell about 10% in the year, the same dollar debts cost more rupees, and the rise is booked as a loss. IndiGo's report says a 1% fall in the rupee against the dollar would cost it about ₹843 crore; ten such steps, roughly the year's fall, come to about ₹8430 crore (derived), close to the ₹8976 crore it booked. Its MD&A adds that these dollar liabilities are payable over eight to ten years: the loss is booked now, the payments come over years.

Current items are due or used within about a year; non-current ones later. Chapter 7 reads the dates.

Maya's ₹5 lakh profit became only ₹50000 more in the bank, because the office caterer had not paid, a fryer was bought and the owners were paid. A company's cash flow statement shows the same, in three parts: cash from operating activities (running the business), investing activities (buying or selling long-term assets and investments) and financing activities (borrowing, repaying and paying the owners).

Cash before revenue. Info Edge: show the note on Info Edge · NSE: NAUKRI runs Naukri.com. Employers pay upfront for a subscription, and the company counts the revenue evenly over the months it serves them. In FY26 it billed ₹3178 crore (its own measure: show the note on Company measures) and counted ₹3052 crore as revenue. On 31 March 2026, ₹1498 crore had been paid but not yet earned: it sits on the balance sheet as a liability, deferred revenue, because Info Edge still owes the service. Customers owed it only ₹10.8 crore.

Profit with no cash. The same year, Info Edge's own profit was ₹5536 crore, but its cash from operations was ₹1169 crore. The difference is mostly one entry: a ₹5200 crore rise in the value of the PB Fintech shares it received when a company it jointly owned merged into PB Fintech. The shares are worth more; no cash came in. The cash flow statement starts from profit before that gain and adds back what did not move money.

Neither gap is good or bad by itself. A gap between profit and cash is a question to follow into the notes; how much it should matter is a question for how to research a stock.

Four questions for any debt: how much, how soon, at what cost, and in which currency. The balance sheet gives the first; the notes give the rest.

How soon. IndiGo's note on liquidity risk: show the note on Where the timetable is lists its lease payments by date, before discounting: ₹14788 crore within a year, ₹49085 crore in one to five years and ₹25501 crore after five; ₹89374 crore in all. That is more than the ₹75943 crore on the balance sheet, because it includes the interest still to come.

Against what. The same page lists ₹51651 crore of cash, bank deposits and investments, of which ₹15434 crore is restricted (held as security), and ₹2606 crore of credit lines it had not drawn. IndiGo's own debt-to-equity measure (its debt divided by the owners' part), counting leases as debt, was 11.15 times. Whether that is high for an airline is a question for how to research a stock.

At what cost, and in which currency. Finance costs, the year's interest, were ₹5891 crore in FY26, against ₹5080 crore the year before; and chapter 5 showed the currency: US dollars.

When the dates come first: IL&FS. Infrastructure Leasing & Financial Services lent to and built roads and power projects that pay back over many years, and funded them partly with borrowing it had to keep rolling over, repaying old loans with new ones. In 2018 its group companies began missing payments; once its ratings fell, no one would refinance it. It owed more than ₹90000 crore. On 1 October 2018 the National Company Law Tribunal let the government replace its entire board. A total that had looked large but manageable became urgent because of the dates.

The small number beside a line on a statement is its note. In IndiGo's standalone balance sheet, the line "Lease liabilities" carries note 18.b, which says what the liability holds; note 31 gave chapter 5 its currency and chapter 7 its dates. The first notes, the accounting policies, say how each item is measured: leases, for example, at today's value of the payments still due.

What might still be owed. A provision is a liability already booked for a likely payment. A contingent liability is a possible one that depends on an outcome not yet known; it is disclosed in the notes, not booked. IndiGo's note 33, in its standalone accounts: if the tax authorities win their case that certain incentives it received on its aircraft are taxable, it would owe ₹2418.5 crore of income tax, before interest and penalty. Tax tribunals ruled for IndiGo; the department's appeals are pending in the Delhi High Court; on legal advice, no provision is booked. It is neither a debt nor nothing: a sized risk, with its reasons.

Who it deals with. A related party is a person or company closely tied to the company: its subsidiaries, its promoters, its directors and their firms. In IndiGo's standalone accounts, ₹32610 crore of its lease liabilities, about 39% (derived), are owed to related parties, mostly its own aircraft-leasing subsidiary in GIFT City, India's international financial services centre, which owned 78 aircraft on 31 March 2026 and leased 45 to IndiGo during the year. In the group accounts: show the note on IndiGo's standalone lease liabilities these leases disappear, because a group cannot owe itself (chapter 1). Most related-party dealings are ordinary business; the note lets you check who, what and at what price.

Read each note against last year's: a new policy, a new estimate or a re-sorted line can change a trend without anything changing in the business.

Where. Before each set of statements. IndiGo's auditor, S.R. Batliboi & Co LLP, signed its report on the group accounts on 29 May 2026 (page 233); Mahindra's, B S R & Co. LLP, signed on 5 May 2026 (page 303).

Read the opinion first. There are four kinds: unmodified (the statements give a true and fair view); qualified (they do, "except for" one material matter); adverse (they do not give a true and fair view); and a disclaimer (the auditor could not gather enough evidence to give an opinion). Every FY26 opinion read for this lesson is unmodified: IndiGo's on its group accounts, Mahindra's on both sets, and Info Edge's: show the note on Info Edge's auditor on its standalone accounts. Look also for a paragraph headed "Emphasis of Matter" or "Material Uncertainty Related to Going Concern": the auditor pointing at something you must read.

Then the key audit matters: show the note on Key audit matters: the areas that took most of the auditor's attention, with what was done about each. IndiGo's three: when passenger revenue is counted; the accounting and tax of aircraft leases and incentives; and provisions for aircraft maintenance. They are not separate opinions and not findings of wrongdoing; they tell you where the judgement is.

What it is not. An audit gives reasonable assurance on the financial statements: high confidence, not certainty. It does not prove every number right, it does not cover every claim in the glossy pages, and it says nothing about whether the share is worth buying.

When the cash was not there: Satyam. On 7 January 2009 the chairman of Satyam Computer Services wrote to his board that its balance sheet of 30 September 2008 showed ₹5361 crore of cash and bank balances, of which ₹5040 crore did not exist: about 94% (derived). That day its share closed at ₹40.25 on NSE, against ₹178.95 the day before (−77.5%, derived). The accounts had been audited. In 2011 the US SEC found that the auditors' staff, affiliates of PwC in India, had failed to confirm Satyam's cash balances; the affiliates agreed to pay $6 million and Satyam $10 million to settle. An audit lowers the risk of error and fraud; it cannot remove it.

What no report can tell you. It describes a finished year: the FY26 reports were filed months after 31 March 2026, and the business has moved on since. Later news comes in quarterly results and exchange filings. And reading the numbers is not yet judging them: turning them into a decision you can explain is the next lesson.