How to read an Indian startup's annual financials

Every company registered in India, including private limited startups, must prepare audited financial statements each year and file them with the Registrar of Companies under the Ministry of Corporate Affairs. The Indian financial year runs from 1 April to 31 March, so FY26 means April 2025 to March 2026. Filings usually appear some months after the year ends, which is why news about a startup's yearly numbers often arrives in the second half of the calendar year.

Listed companies also publish results every quarter, and their reports are on the stock exchange websites. Private startups publish less, so reporters and data firms read the filings from the registry. Treat early press numbers with care: they are sometimes based on draft or management figures.

The profit and loss statement, also called the income statement, lists what the company earned and spent over the year. Start with revenue from operations: the money from selling its product or service. Separate this from other income, which may include interest earned on cash held in banks and is not the core business.

Then look at the big expense lines: cost of materials or services, employee benefits, marketing and advertising, finance costs (interest), depreciation, and other expenses. The gap between income and expenses is the profit or loss before tax, and after tax is the final line. Compare each cost line with revenue. If revenue doubled but marketing tripled, growth was bought, not earned.

• Revenue from operations: the core sales.
• Other income: interest, gains and one-off items, not the main business.
• Employee and marketing costs: where most startup money goes.
• Loss for the year: what is left after everything, including tax.

The balance sheet is a snapshot on the last day of the year. One side lists what the company owns and is owed, called assets: cash, bank deposits, money customers owe, stock, equipment and investments. The other side lists what it owes and the owners' stake: loans, bills due to suppliers, and equity.

For a startup, look at cash and bank balances first, since they tell you how long the company can keep going. Then look at borrowings, the money customers owe (receivables) and what the company owes suppliers (payables). Check the equity section for accumulated losses. A startup that has raised ₹300 crore and shows accumulated losses of ₹250 crore has used most of what it raised.

The cash flow statement tracks real money moving in and out, in three parts: from operations, from investing, and from financing. Profit and cash differ because of timing and non-cash items such as depreciation and stock option expenses.

Operating cash flow is the key line. Negative means the business burns cash to run. Financing cash flow shows money raised from investors or lenders. If operating cash flow is negative and financing inflow is large, the company is living on fresh funding. The cash flow statement is also where you can see the real burn rate.

The notes explain the numbers, and they are often where the useful details sit. Look for how revenue is recognised, who the related parties are and how much business is done with them, any contingent liabilities such as tax disputes, and how investor shares like compulsorily convertible preference shares are treated. The auditor's report is also worth reading. A clean opinion is normal. Emphasis-of-matter paragraphs, remarks about going concern, or qualified opinions are signals to read more closely.

Check whether the numbers are standalone, meaning one company, or consolidated, meaning the parent together with its subsidiaries. A startup with several subsidiaries may show different pictures in each. Larger and listed companies follow Ind AS, India's accounting standards aligned with international ones, while many smaller ones follow the older Indian standards, so line names can differ.

Compare this year with last year for revenue, total expenses, loss, cash and borrowings. Divide the loss by revenue to see how many paise are lost per rupee earned. Divide cash by monthly operating outflow to estimate runway. Look at the largest cost and ask whether it grew faster than revenue. Check if one customer or related party gives a large share of revenue. Finally, check the date: the numbers describe the past, and the company may look quite different today. This is a learning guide, not advice; confirm anything important with a chartered accountant.