Dhanlaxmi Fabrics auditor exits citing commercial viability

Dhanlaxmi Fabrics Limited said RHAD & Co resigned as its statutory auditor on November 14, 2026, citing that continuation of the engagement was no longer commercially viable to the firm. The resignation took effect before the auditor’s five-year term, running from financial year 2024-25 to financial year 2029-30, was due to end.

Why did Dhanlaxmi Fabrics’ auditor resign?

RHAD & Co resigned because it said that continuing the audit engagement was no longer commercially viable to the firm. The auditor gave this reason in its resignation disclosure dated November 14, 2026, which Dhanlaxmi Fabrics filed with its unaudited standalone and consolidated results for the quarter and six months ended September 30, 2026.

The auditor did not cite a management dispute, an information-access issue or inability to obtain audit evidence. RHAD & Co marked as not applicable the disclosures on whether requested information had not been provided, whether sufficient appropriate audit evidence was unavailable, and whether alternative audit procedures under Standard on Auditing 705 (Revised) were required.

Dhanlaxmi Fabrics separately said the auditor had raised no concerns regarding management and that no material reason required Audit Committee deliberation. The Board meeting on November 14, 2026 began at 5:00 p.m. and ended at 5:50 p.m.; the company said the resignation letter was dated and received on that same date.

How much of RHAD & Co’s Dhanlaxmi Fabrics term remained?

RHAD & Co resigned before completing a five-year appointment covering financial year 2024-25 through financial year 2029-30. The firm was appointed at the 32nd annual general meeting on September 30, 2024, and its term was scheduled to expire at the conclusion of the 37th annual general meeting following the statutory audit for financial year 2029-30.

The resignation disclosure records an association of seven years and gives August 13, 2019 as the date on which RHAD & Co was appointed. It also identifies the latest review report before the resignation as the limited-review reports for the quarter and year ended June 30, 2026, issued on August 14, 2026.

RHAD & Co also signed the standalone and consolidated limited-review reports for the September 30, 2026 results on November 14, 2026. In the standalone report, the firm said nothing had come to its attention suggesting required disclosures were not made or that the statement contained a material misstatement; the consolidated conclusion was not modified.

Did the resignation affect a Dhanlaxmi Fabrics subsidiary?

Yes. RHAD & Co also resigned as statutory auditor of Dhanesh Fabrics Private Limited, which Dhanlaxmi Fabrics identifies as a material subsidiary. That resignation letter was dated, received and effective on November 14, 2026, the same date as the resignation from Dhanlaxmi Fabrics.

The Regulation 30 annexures for Dhanlaxmi Fabrics and Dhanesh Fabrics Private Limited name RHAD & Co as auditor and give November 14, 2026 as the date of cessation. Each annexure says the reason for the change is resignation as stated in the auditor’s letter, while disclosure of a relationship with directors is marked not applicable.

Dhanesh Fabrics Private Limited was one of two subsidiaries named in the consolidated limited-review report for the six months ended September 30, 2026. The other was Western Chlorides & Chemicals Private Limited, so the filing identifies an auditor change at one material subsidiary rather than at every entity included in the group results.

What financial results accompanied the auditor resignation?

Dhanlaxmi Fabrics reported standalone revenue from operations of Rs 3.95 crore for the quarter ended September 30, 2026. This was below Rs 5.03 crore in the quarter ended June 30, 2026, but above Rs 3.44 crore in the quarter ended September 30, 2025; six-month revenue rose to Rs 8.98 crore from Rs 5.21 crore a year earlier.

Management said sales were reduced mainly because of the permanent and complete closure of the textile processing unit at Dombivli. Dhanlaxmi Fabrics described its business as a single textile-fabric segment, meaning the filing does not provide separate operating-segment revenue to quantify the closure’s effect.

Standalone profit after tax was Rs 95.72 lakh in the September 2026 quarter, compared with losses of Rs 1.34 crore in the preceding quarter and Rs 1.20 crore in the September 2025 quarter. Consolidated profit after tax was Rs 46.97 lakh, compared with losses of Rs 31.23 lakh in the June 2026 quarter and Rs 1.31 crore a year earlier.

The September 2026 results included exceptional items. Dhanlaxmi Fabrics said these comprised a building-repairs maintenance reimbursement invoice to Western Chlorides & Chemicals Private Limited, a loss on sale of a motor car, and capital gain or loss on sale of shares, but it did not provide individual amounts for those components.

What do the review reports say about the reported results?

The review reports distinguish RHAD & Co’s commercial-viability explanation from its conclusions on the September 30, 2026 financial statements. The standalone report was conducted under Standard on Review Engagements 2410 and says a review provides moderate assurance through inquiries and analytical procedures, rather than an audit opinion.

For the six months ended September 30, 2026, standalone profit after tax was Rs 60.85 lakh, against a loss of Rs 1.31 crore in the corresponding 2025 period. Consolidated profit after tax was Rs 15.73 lakh, compared with a loss of Rs 1.46 crore in the year-earlier six months, while consolidated revenue rose to Rs 9.06 crore from Rs 6.15 crore.

The standalone balance sheet reported total assets of Rs 48.73 crore at September 30, 2026, compared with Rs 48.01 crore at March 31, 2026. Standalone cash and cash equivalents were Rs 7.05 lakh at September 30, down from Rs 60.89 lakh at the beginning of the financial year, according to the six-month cash-flow statement.

Conclusion

RHAD & Co’s November 14, 2026 exit ended its statutory-auditor role at Dhanlaxmi Fabrics and material subsidiary Dhanesh Fabrics Private Limited before the financial year 2029-30 term was due to conclude. The stated reason was commercial viability, while both the company and the auditor disclosed no management concerns, evidence limitation, missing-information issue or other material reason.

The next disclosure to watch is whether Dhanlaxmi Fabrics identifies a successor auditor for the company and Dhanesh Fabrics Private Limited, as this filing does not name one. Subsequent results will also show the financial effect of the Dombivli textile-processing-unit closure, which management cited as the main reason for reduced sales in the September 2026 quarter.