# Annual Report Triage > Extract the investment-relevant signal from an Indian listed company's annual report in under two hours. Use when reading or summarising an annual report, integrated report, or Form MR-3 / CARO / BRSR content for an NSE- or BSE-listed company, or when the user asks "what's in this annual report", "should I be worried about X in the AR", or wants a company's disclosures compared year over year. - Skill: `sharma23yash-oss/annual-report-triage` (Agent Skill) - Install (CLI): `npx skillmds@latest add sharma23yash-oss/annual-report-triage` - Raw SKILL.md: https://api.skillmd.com/api/skills/sharma23yash-oss/annual-report-triage/raw - Safety review: pending - Works with: Claude Code, Claude.ai, OpenAI Codex - Category: Docs & Writing - License: MIT - Author: sharma23yash-oss (https://skillmd.com/u/sharma23yash-oss) - Updated: 2026-09-17 - Page: https://skillmd.com/skills/sharma23yash-oss/annual-report-triage --- # Annual Report Triage (India) An Indian annual report runs 200–400 pages. Roughly 30 of them matter. This skill is the read order, the extraction checklist, and the output format. ## Rule 0: never read front to back The first 60–100 pages are designed to be read: chairman's letter, glossy segment spreads, ESG photography. They are marketing. The signal is at the back, in the notes to accounts, and in the statutory reports nobody proofreads for tone. **Read in this order:** 1. Auditor's Report (independent auditor's report on consolidated financials) 2. CARO 2020 annexure 3. Notes to accounts — related party transactions 4. Notes to accounts — contingent liabilities and commitments 5. Cash flow statement (consolidated) 6. Segment reporting note (Ind AS 108) 7. Subsidiary/associate list — AOC-1 8. Board's Report + Secretarial Audit (Form MR-3) 9. Corporate governance report — promoter pledge, board changes, auditor changes 10. MD&A — only now, and only to check management's story against what steps 1–9 said 11. BRSR — for top 1,000 listed entities by market cap ## Step 1 — Standalone vs consolidated Always work from **consolidated** unless the company has no subsidiaries. Then check the gap: - Consolidated revenue >> standalone revenue → the operating business sits in subsidiaries. Read AOC-1 carefully. - Standalone PAT >> consolidated PAT → subsidiaries are loss-making, or there is a minority-interest drag. - Standalone has large "investments in subsidiaries" that never generate dividend or equity income → possible parked capital. Record both. A company whose story changes between the two statements is telling you where to look. ## Step 2 — Auditor's Report Extract, verbatim: - **Opinion type**: Unmodified / Qualified / Adverse / Disclaimer. Anything other than unmodified is a hard stop — read the basis paragraph in full and quantify the impact. - **Key Audit Matters (KAM)**: the auditor's own list of what was hardest to audit. This is the single highest-signal paragraph in the document. Revenue recognition timing, impairment of goodwill or intangibles, expected credit loss provisioning, and litigation provisions are the recurring ones. - **Emphasis of Matter (EOM)**: not a qualification, but the auditor flagging something they want you to read. Treat as a pointer, not a verdict. - **Auditor's report on Internal Financial Controls (IFC)**: an adverse IFC opinion with a clean financial opinion is a contradiction worth understanding. - **Auditor identity and tenure**: under Section 139 of the Companies Act 2013, an audit firm rotates after two terms of five years. A resignation *mid-term* is a different event entirely — see `forensic-redflags-india`. ## Step 3 — CARO 2020 The Companies (Auditor's Report) Order 2020 forces the auditor to answer specific questions. The clauses that carry investment signal: | Clause | What it forces disclosure of | Why it matters | |---|---|---| | 3(i) | PPE and intangible verification, title deeds not in company name | Title deed gaps in a real-estate-heavy balance sheet | | 3(ii) | Inventory verification; quarterly returns filed with banks vs books | **A mismatch between bank-submitted stock statements and audited books is one of the strongest fraud signals in Indian reporting** | | 3(iii) | Loans/advances to related parties, terms, repayment | Promoter funding routed through the listed entity | | 3(vii) | Statutory dues in arrears | Cash stress often shows here first (GST, PF, TDS) | | 3(ix) | Default in repayment to lenders; wilful defaulter status; end-use of term loans | Diversion of short-term funds to long-term use | | 3(x) | Use of IPO/FPO/preferential issue proceeds | Deviation from stated use of proceeds | | 3(xi) | Fraud reported, whistle-blower complaints | Read in full, always | | 3(xvii) | Cash losses in current and preceding year | | | 3(xix) | Auditor's opinion on the entity's ability to meet liabilities for one year | Effectively a soft going-concern statement | ## Step 4 — Related party transactions (RPT) Find the RPT note. Build a table for the current and prior year: - Counterparty name and relationship - Nature (sale of goods, purchase, loan given, loan taken, guarantee, royalty, rent, remuneration) - Amount, and amount as a % of the corresponding P&L or balance sheet line Flags: - Royalty or brand fee paid to a promoter entity, rising faster than revenue - Sales to a related party at a margin materially different from third-party sales - Loans or guarantees given to promoter-group entities with no commercial rationale - Purchases from a single related-party supplier that is a shell (check MCA for its financials) - RPTs approved under SEBI LODR Regulation 23 by shareholder resolution — an RPT large enough to need a special resolution is large enough to model ## Step 5 — Contingent liabilities and commitments Sum them and express as a % of net worth. Split into: - **Tax disputes** (income tax, GST, excise/service tax legacy) — often large, often stale, usually settle for a fraction - **Guarantees given** on behalf of subsidiaries or related parties — these are real leverage the balance sheet does not show - **Claims not acknowledged as debt** — read the narrative - **Capital commitments** — forward capex the cash flow forecast must absorb A contingent liability book above ~50% of net worth deserves a paragraph in your note. Guarantees on behalf of *unlisted promoter entities* deserve one at any size. ## Step 6 — Cash flow reality check Compute, for the last 5 years if available: ``` CFO / EBITDA healthy: 0.7–1.0+ sustained Cumulative CFO / Cumulative PAT healthy: ≈ 1.0 over a cycle FCF = CFO − capex (purchase of PPE, net) ``` If PAT compounds and CFO does not, the earnings are on the balance sheet, not in the bank. Locate them: receivables, inventory, loans and advances, or capital work-in-progress that never gets commissioned. Also check where "other income" comes from. Treasury income dressed as operating performance is common in cash-rich Indian mid-caps. ## Step 7 — Segments (Ind AS 108) Segment disclosure is reported the way management reviews the business, so it reveals the internal org chart. Check: - Segment revenue and result trend — is the growth segment also the profitable one? - Unallocated corporate expense as % of revenue, and whether it is growing - Capital employed by segment — where is money actually being deployed - Geographic split, and revenue from a single customer above 10% (a required disclosure) ## Step 8 — The subsidiary web (AOC-1) Form AOC-1 lists every subsidiary, associate and joint venture with turnover, PAT and net worth. Build the list and ask: - How many entities exist relative to the size of the business? - Are there overseas subsidiaries in jurisdictions with no operating logic? - Which subsidiaries are loss-making, and are they being funded by the parent? - Have subsidiaries been added or struck off this year? Why? ## Step 9 — Governance and Secretarial Audit - **Form MR-3 (Secretarial Audit)**: qualifications here are rare and therefore meaningful. - **Promoter pledge**: from the corporate governance report and the shareholding pattern. Any pledge above ~25% of promoter holding is a structural risk; above 50%, treat the equity as an option on the promoter's own solvency. - **Board composition**: independent director count, resignations during the year and the reasons stated in their resignation letters (SEBI requires disclosure of the full letter). - **Managerial remuneration** as a % of PAT, and the median-employee ratio disclosure under Section 197(12). ## Step 10 — BRSR Mandatory for the top 1,000 listed entities by market capitalisation. Ignore the narrative; use the quantitative section: - Energy and water intensity per rupee of turnover, trended - Complaints: consumer, employee, and community — counts and resolution - Fines and penalties paid for non-compliance (Section C, Principle 1) - Assessed vs. self-declared: BRSR Core is reasonably assured for the top 250 by market cap ## Output format Produce a memo in this shape. Keep it to two pages. ```markdown # — Annual Report FY Triage **Verdict in one line:** ## Numbers that matter | Metric | FY-2 | FY-1 | FY | Comment | |---|---|---|---|---| ## Auditor - Opinion: - KAMs: - CARO exceptions: ## Related party ## Off-balance-sheet - Contingent liabilities: ₹X cr (Y% of net worth) - Guarantees to group entities: ₹X cr ## Cash conversion - CFO/EBITDA (5y): ... - Cumulative CFO/PAT (5y): ... ## Red flags 1. ... ## Questions for management 1. ... ``` ## Hard rules - **Quote page numbers.** Every claim in the memo cites the note or page it came from. - **Never infer a number that is disclosed.** If you cannot find it, say "not disclosed" — that is itself a finding. - **Compare to last year's AR.** Most red flags are changes in language, not levels: a KAM that appears for the first time, an accounting policy that shifts, a segment that gets merged into another, a disclosure that quietly disappears. - **Do not issue a buy/sell recommendation from an annual report alone.** This skill produces evidence, not a rating.