Virinchi Limited — financial distress indicators
Financial-health summary
Virinchi Limited's reported numbers place it in the 'Watch' financial-health band (distress score 45/100). The main indicators are operating profit does not cover interest, market-implied default probability >20% and ohlson o-score signals likely failure. Independently, the Ohlson accounting model puts its 1-year failure probability at 63% and the market-implied (Merton) default probability is 68.4%. In its favour: operating cash flow is positive over the latest 12 months.
Stress by dimension
Share price — last 12 months
Indicators behind the score
Each red flag shows the evidence from the company’s own filings and the financial or legal principle behind it. Points add to the 0–100 score.
Interest coverage (EBIT / interest) is 0.41×.
When EBIT < interest, debt service is funded from cash reserves or new borrowing — the classic precursor to payment default and covenant breach.
Merton distance-to-default -0.48 σ → PD 68%.
Structural (Merton/KMV) model: equity is a call option on assets; low distance-to-default means assets are close to the default point.
O-score 0.54 → model probability 63%.
Ohlson (1980) logit model of 1-year corporate failure; O > 0 (p > 50%) is the original failure cut-off.
Operating margin fell from 23% to 5% in two years.
Sharp margin compression signals loss of pricing power or cost control.
Revenue vs net income
Cash generation
Debt vs cash vs equity
✅ Mitigating factors
- Operating cash flow is positive over the latest 12 months.
- Strong current ratio (1.69).
- High insider/promoter ownership (43%) aligns management with survival.
📰 Recent news scan
- Virinchi dispatches FY26 annual report ahead of September 30 AGM - scanx.tradeGoogle News · 2026-09-30
- Virinchi Share: Bull Case vs Bear Case for 2026 - UnivestGoogle News · 2026-09-29
- Virinchi Ltd Share Price Today NSE/BSE Charts - Alice BlueGoogle News · 2026-09-17
- Virinchi Ltd. Peer Comparison – Compare with Others - Value ResearchGoogle News · 2026-08-30
⚖️ Indian legal pathway — the IBC, 2016
How insolvency starts
- A financial creditor (§7), an operational creditor after a demand notice (§§8–9) or the company itself (§10) can apply to the NCLT once a default of at least ₹1 crore occurs (§4).
- On admission a moratorium (§14) stops suits and recovery; the board is suspended and an insolvency professional runs the company.
- The Committee of Creditors approves a resolution plan with 66% of voting share (§30(4)) within an outer limit of 330 days (§12); otherwise liquidation (§33) under the §53 waterfall — equity ranks last. Defaulting promoters are generally barred from bidding (§29A).
Earlier warning stages
- RBI's Prudential Framework for Resolution of Stressed Assets (7 June 2019): lenders must review a borrower within 30 days of default and implement a resolution plan, or provide more.
- Listed companies must disclose loan defaults to exchanges under SEBI (LODR); a rating downgrade to “D” is a public signal.
- Auditors must report going-concern uncertainty (SA 570 / Ind AS 1).
Frequently asked questions
What do Virinchi Limited's financial-health indicators show?
As of 2026-10-09, Virinchi Limited's public financial data places it in the 'Watch' band with a distress score of 45/100, driven by operating profit does not cover interest, market-implied default probability >20% and ohlson o-score signals likely failure. This is a statistical screen of reported numbers — it does not mean the company is insolvent, has defaulted or will enter insolvency proceedings.
What is Virinchi Limited's financial distress score?
45/100 ('Watch'). Ohlson O-score 0.54 (model 1-year failure probability 63%). Merton distance-to-default -0.48 σ (model default probability 68.4%).
What works in Virinchi Limited's favour?
Operating cash flow is positive over the latest 12 months. Strong current ratio (1.69). High insider/promoter ownership (43%) aligns management with survival.
How are shareholders treated if a company enters insolvency?
Under the IBC the Committee of Creditors controls the resolution; the §53 waterfall pays secured creditors and workers first and equity last. In most resolution plans existing shareholders are wiped out or left with a token stake, and the company may be delisted.
Other IT & Software companies with distress indicators
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- GSS Infotech Limited (GSS)Very weak 72/100
- Suvidhaa Infoserve Limited (SUVIDHAA)Very weak 72/100
- Handson Global Management (HGM) Limited (HGM)Weak 58/100
- RPSG Ventures Limited (RPSGVENT)Weak 58/100
Methodology
Score = capped sum of rule-based red flags across seven dimensions (liquidity, solvency, profitability, cash flow, sales trend, market signal, news). Ohlson O-score (1980) gives an accounting-based 1-year failure probability; Merton distance-to-default (Bharath & Shumway 2008) gives a market-implied probability. Financial institutions use a capital-based rule set. Recalculated every trading day from the latest filings, prices and news.