Gillanders Arbuthnot's (NSE:GILLANDERS) Earnings Aren't As Good As They Appear

We didn't see Gillanders Arbuthnot and Company Limited's (NSE:GILLANDERS) stock surge when it reported robust earnings recently. We think that investors might be worried about the foundations the earnings are built on.

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The Impact Of Unusual Items On Profit

To properly understand Gillanders Arbuthnot's profit results, we need to consider the ₹133m gain attributed to unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. Gillanders Arbuthnot had a rather significant contribution from unusual items relative to its profit to September 2025. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Gillanders Arbuthnot.

An Unusual Tax Situation

Just as we noted the unusual items, we must inform you that Gillanders Arbuthnot received a tax benefit which contributed ₹17m to the bottom line. This is meaningful because companies usually pay tax rather than receive tax benefits. Of course, prima facie it's great to receive a tax benefit. And since it previously lost money, it may well simply indicate the realisation of past tax losses. However, our data indicates that tax benefits can temporarily boost statutory profit in the year it is booked, but subsequently profit may fall back. Assuming the tax benefit is not repeated every year, we could see its profitability drop noticeably, all else being equal.

Our Take On Gillanders Arbuthnot's Profit Performance

In its last report Gillanders Arbuthnot received a tax benefit which might make its profit look better than it really is on a underlying level. And on top of that, it also saw an unusual item boost its profit, suggesting that next year might see a lower profit number, if these events are not repeated. Considering all this we'd argue Gillanders Arbuthnot's profits probably give an overly generous impression of its sustainable level of profitability. If you'd like to know more about Gillanders Arbuthnot as a business, it's important to be aware of any risks it's facing. Our analysis shows 3 warning signs for Gillanders Arbuthnot (1 is concerning!) and we strongly recommend you look at them before investing.

Our examination of Gillanders Arbuthnot has focussed on certain factors that can make its earnings look better than they are. And, on that basis, we are somewhat skeptical. But there are plenty of other ways to inform your opinion of a company. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.