Axel Polymers Q3 Loss Narrows, But ₹31.57 Cr GST Notice Poses Major Risk

Introduction

Axel Polymers Limited announced its unaudited financial results for the third quarter ended December 31, 2025, revealing a mixed performance. While the company successfully narrowed its net loss compared to the previous year, it did so against a backdrop of declining revenue. More significantly, a substantial show cause notice from GST authorities casts a shadow over its operational improvements, introducing considerable financial uncertainty.

Q3 Financial Performance Breakdown

For the third quarter of fiscal year 2026 (Q3FY26), Axel Polymers reported a 20.28% year-on-year decline in revenue from operations, which stood at ₹8.86 crore compared to ₹11.11 crore in Q3FY25. Despite this sharp fall in income, the company managed to improve its bottom line. The net loss for the quarter was ₹0.62 crore, a notable improvement from the ₹0.76 crore loss recorded in the corresponding period of the previous year. This led to a much-improved Earnings Per Share (EPS) of ₹-0.06, compared to ₹-0.89 in Q3FY25.

Nine-Month Performance Review

The positive trend in loss reduction was even more pronounced over the nine-month period ending December 31, 2025. During these nine months, Axel Polymers posted a net loss of just ₹0.57 crore, a significant reduction from the ₹2.09 crore loss reported for the same period in the prior fiscal year. However, this improvement came alongside a steep 53.47% contraction in revenue from operations, which fell to ₹31.28 crore from ₹67.22 crore a year earlier.

Cost Management Initiatives

The primary driver behind the improved profitability was effective cost control. The company's cost of materials consumed saw a substantial decrease of 27.38%, falling to ₹6.45 crore in Q3FY26 from ₹8.89 crore in Q3FY25. This reduction was crucial in offsetting the negative impact of lower sales. In contrast, employee benefit expenses rose slightly to ₹1.02 crore, while finance costs saw a marginal decrease to ₹0.77 crore.

The Looming GST Challenge

The most significant challenge for Axel Polymers is a regulatory one. The company received a show cause notice from the Commissioner of Central GST & Central Excise, Vadodara II. The notice follows search proceedings conducted at the company's factory premises on July 3, 2024.

Details of the GST Notice

The notice alleges irregularities related to the availment and passing of Input Tax Credit (ITC) through invoices issued without the actual movement of goods. The period under scrutiny spans from fiscal year 2021-22 to 2024-25. Authorities have proposed an ITC reversal of approximately ₹31.57 crore, along with the recovery of applicable interest and penalties. This potential liability is substantial, nearly matching the company's entire revenue for the first nine months of the current fiscal year.

Capital Base Expansion

During the period, Axel Polymers expanded its capital base. The paid-up equity share capital increased to ₹11.01 crore as of December 31, 2025, up from ₹8.52 crore in the previous year. This increase in the number of shares contributed to the significant improvement in the EPS figure, as the loss was distributed over a larger equity base.

Market and Investor Perspective

The Q3 results present a dual narrative for investors. On one hand, the ability to shrink losses amid falling revenue points to improved operational efficiency and disciplined cost management. On the other hand, the GST notice introduces a material risk that could severely impact the company's financial health. The magnitude of the proposed penalty is a major concern, given the company's current scale of operations and market capitalization.

Conclusion

Axel Polymers has demonstrated resilience by controlling costs to improve its bottom line in a challenging revenue environment. However, the company's future trajectory will largely depend on the outcome of the ₹31.57 crore GST show cause notice. Investors will be closely monitoring developments on this front, as its resolution will be critical for the company's long-term financial stability and growth prospects.