One day after SS Innovations International, Inc (SSII), an Indian maker of surgical robotics systems, warned it would not file its annual report on time, the company revealed accounting errors that inflated revenue and significantly distorted the company’s recent financial performance.

Trouble began after the company’s auditor BF Borgers was charged in a massive fraud scheme, which led SS Innovations to hire BDO to reaudit its financials.

While BDO worked on the company’s 2022 and 2023 financials, SS Innovations admits it filed its 2024 quarterly filings without the required review procedures specified by the Public Company Accounting Oversight Board (PCAOB).

Subsequently, BDO identified material errors in SS Innovations’ 2022 and 2023 financials and the company’s first three quarterly filings in 2024.

In restating 2024’s financials, SS Innovations revealed it had:

—Overstated revenue $2.49 million, or 19.87% in the nine months ended September 30, 2024
—Understated operating loss $5.78 million, or 50.97% in the nine months ended September 30, 2024

Notably, with just $220,000 in cash, the footnotes reveal SS Innovations borrowed $30 million in the last ninety days from Sushruta Pvt. Ltd.

This appears to be an undisclosed related party transaction as SS Innovations CEO Sudhir Srivastava is the sole owner of Sushruta Pvt, which also owns shares of SS Innovations.

Though the latest filing includes a going concern warning acknowledging SS Innovations has been dependent on related parties to fund operations— and the prior annual report on which investors can no longer rely identifies Sushruta as a related party— the latest filing does not clearly identify Sushruta as a related party or its connection to Srivastava.

With an Enterprise Value (EV) of approximately $1.8 billion, SS Innovations is priced as if it will grow annual sales to more than $3.3 billion, up from an estimated $22 million in 2024. To justify its current share price of $9.75 our Reverse DCF— which quantifies investor expectations embedded in the current share price— indicates SS Innovations must:

—Grow sales 75% annually for the next decade
—Increase NOPAT margin to 12%, higher than our 2023 estimate of (349.4%)
—Increase Invested Capital (IC) Turns to 1.2, up from 2023 estimate of 0.26

Notably, the current share price also implies SS Innovations increases Return on Invested Capital (ROIC) to 18% from our 2023 estimate of (87.2%) and 3-year average estimate of (78.3%):