Ashapura Intimates: ₹302 Cr Profit Masks Zero Revenue & Auditor Warning

Introduction

Ashapura Intimates Fashion Limited has reported a staggering net profit of ₹302.02 crores for the quarter ending December 31, 2025. However, this figure does not reflect any business activity. Instead, it is the result of a one-time exceptional credit from a liability write-off mandated by the National Company Law Tribunal (NCLT). The company generated zero revenue from operations during the quarter, a situation that has persisted for years. Compounding the concerns, the company's independent auditor has issued a disclaimer of opinion, citing an inability to verify the financial statements and expressing significant doubt about the company's ability to continue as a going concern.

The Illusion of Profit

The financial results for the third quarter of FY26 present a misleading picture of health. The reported net profit of ₹302.02 crores is almost entirely attributable to an exceptional credit of ₹302.21 crores. This credit arose from the write-off of past liabilities, including loans, creditors, and statutory dues, as part of a resolution process approved by the NCLT. Without this accounting adjustment, the company's performance would reflect its true operational state. During the quarter, revenue from operations was nil, while other income was a negligible ₹0.02 crores and operating expenses stood at ₹0.50 crores. This highlights that the company has no functioning business generating sales or income.

Auditor's Severe Warning: A Disclaimer of Opinion

A major red flag for any investor is the disclaimer of opinion issued by the independent auditor, N.K. Sarraf & Associates. This is one of the most severe reports an auditor can issue, indicating they could not obtain sufficient appropriate audit evidence to form an opinion on the financial statements. The auditor explicitly stated that the financial statements may contain material misstatements and were not prepared in accordance with Indian Accounting Standards (Ind AS). The auditor's report raised significant doubts about Ashapura's ability to continue as a 'going concern,' effectively questioning its survival.

Key Reasons for the Auditor's Disclaimer

The auditor's inability to form an opinion stems from several critical issues:

• Lack of Evidence: The auditor could not obtain sufficient proof for opening balances and other crucial financial data.
• Suspected Fraud: Concerns were raised about suspected fraudulent transactions dating back to the 2017-18 financial year.
• Regulatory Non-Compliance: The company has contravened rules regarding related party transactions and failed to deposit numerous statutory dues, including PF, ESIC, GST, TDS, and Income Tax, for multiple years.
• Pending Litigations: The full impact of ongoing law enforcement investigations and related litigation could not be determined.
• Asset Valuation: The value of plant, machinery, and other fixed assets has not been assessed for impairment, meaning their book value may be significantly overstated.

The NCLT Intervention and New Ownership

Ashapura Intimates has a troubled history, having been under liquidation proceedings. A pivotal NCLT order on June 10, 2025, shifted the company's status from 'liquidation' to 'active.' This order removed the previous board, appointed new directors, and approved the acquisition of the company by Grow House Agro Limited, which was declared the successful bidder in an e-auction. The NCLT order facilitated the liability write-off that created the artificial profit. However, the mandated changes in shareholding to reflect the new ownership have not yet been implemented, adding another layer of uncertainty.

Financial Health Summary (Q3 FY26)

Operational Paralysis and Compliance Failures

The company has not reported any significant operational activity or revenue since the third quarter of the 2018-19 financial year. This long-term stagnation is the root cause of its financial distress. Furthermore, Ashapura Intimates has failed to meet key regulatory requirements. On January 21, 2026, the company informed stock exchanges of its inability to provide the SEBI Regulation 74(5) compliance certificate for the December 2025 quarter. The reasons cited were the ongoing liquidation order and unpaid fees to depositories NSDL and CDSL, which prevented its registrar and transfer agents from issuing the certificate.

Market and Peer Context

Given its non-operational status, comparing Ashapura Intimates to active peers in the Indian apparel sector, such as Go Fashion (India) Limited or Rupa & Co., is not meaningful. These companies have ongoing revenue streams and transparent financial reporting. Ashapura's situation, characterized by zero revenue, a disclaimer of opinion, and questions about its viability, places it in a category of extreme financial distress, detached from the broader market trends of recovery and growth in the apparel industry.

Investor Risks and Outlook

The combination of factors presents extreme risks for investors. The reported profit is an accounting entry, not a sign of business revival. The auditor's disclaimer of opinion suggests the financial statements are unreliable. The company's future is entirely dependent on the new management's ability to resolve the pending compliance issues, restart operations, and generate sustainable revenue. Until the shareholding changes are implemented and a clear business plan is executed, the outlook remains highly uncertain and speculative.

Conclusion

Ashapura Intimates Fashion's Q3 FY26 results are a stark reminder that headline profit numbers can be deceptive. The ₹302 crore profit is a consequence of a court-ordered financial restructuring, not business performance. The underlying reality is a company with no operations, severe governance red flags raised by its auditor, and a failure to meet basic regulatory compliance. The path forward hinges on the successful implementation of the NCLT resolution plan by its new owners, but the journey to operational and financial stability appears to be long and fraught with significant challenges.