HGSI reports nil capitalisation debt, Rs 46.13 lakh debit balances

HGS (India) Limited (HGSI) reports nil capitalisation debt as at April 30, 2026, but its separate financial-indebtedness certificate records Rs 46.13 lakh of debit balances under fund-based cash-credit and overdraft facilities. The documents use different classifications at the same reporting date and do not provide a reconciliation between them.

Why does HGSI report nil capitalisation debt?

HGSI’s pre-issue capitalisation statement shows dashes for short-term debt, long-term debt and total debts as at April 30, 2026. The statement says its figures are based on the restated statement of assets and liabilities at that date. It defines short-term debts as amounts expected to be paid or payable within 12 months, excluding instalments of term loans repayable within 12 months.

HGSI defines long-term debts as debts other than short-term debts, while including instalments of term loans repayable within 12 months if they are grouped under other current liabilities. The capitalisation statement reports equity share capital of Rs 8.5327 crore and restated reserves and surplus of Rs 91.7956 crore, resulting in total shareholders’ funds of Rs 100.3283 crore. Its long-term-debt-to-shareholders’-funds and total-debt-to-shareholders’-funds lines also show dashes.

The post-issue figures are not shown because HGSI says they cannot be determined before completion of the public issue. For the pre-issue presentation, the table does not state whether debit bank-account balances were excluded from debt, offset against cash, or presented under another accounting classification. It therefore establishes the nil capitalisation debt presentation without explaining every working-capital account balance.

Which fund-based balances does HGSI disclose separately?

HGSI’s financial-indebtedness certificate, dated October 15, 2026, lists two fund-based facilities with total debit balances of Rs 46.13 lakh as at April 30, 2026. Canara Bank’s cash-credit facility was sanctioned at Rs 10 lakh, carried a stated interest rate of 10.40%, and had a Rs 1.54 lakh debit balance. The stated purpose was to meet working-capital requirements.

Kotak Mahindra Bank’s overdraft facility was sanctioned at Rs 25 lakh, carried a stated interest rate of 8.40%, and had a Rs 44.59 lakh debit balance. The certificate places both lines within “secured loans” and totals them at Rs 46.13 lakh marked “Dr.” It says the certificate was based on an independent examination of books of account, restated consolidated financial statements, audited financial statements and other documents.

The certificate provides a specific note for the Canara Bank account. HGSI says it had not utilised the Rs 10 lakh cash-credit limit at the reporting date, resulting in a debit balance in the cash-credit account in its books. The disclosure does not provide an equivalent explanation for the Rs 44.59 lakh debit balance in the Kotak Mahindra Bank overdraft account.

Are HGSI’s debit balances treated as borrowings?

No explicit statement says that the Rs 46.13 lakh debit balances are the same as borrowings in the capitalisation statement. The capitalisation statement presents nil short-term and long-term debt, while the separate certificate groups cash credit and overdraft under secured loans. The supplied disclosures consequently show different presentation frameworks for balances reported as at April 30, 2026.

HGSI’s restatement note shows that the classification of a cash-credit-account balance has changed in an earlier period. For the year ended March 31, 2025, a negligible overdue Canara Bank cash-credit balance of Rs 1,000 was reclassified from cash and cash equivalents to short-term borrowings. That earlier restatement shows that a cash-credit balance can be classified as a borrowing, but it does not state the classification of either April 30, 2026 debit balance.

Finance-cost data provide a separate indication of bank-facility costs but do not resolve the classification difference. HGSI reported finance costs of Rs 38,000 for FY 2025-26, compared with Rs 10.75 lakh for FY 2024-25, and Rs 2,000 for the period ended April 30, 2026. The restatement note says interest on working capital, processing fees and commission on bank guarantees had previously been included in bank charges before being reclassified as finance costs in FY 2024-25 and FY 2023-24.

What security and other facilities does HGSI disclose?

HGSI says the Canara Bank working-capital limit is secured by hypothecation of stock and trade receivables, while the Kotak Mahindra Bank working-capital limit is based on fixed-deposit security. Hypothecation is a charge over specified movable assets while the borrower retains possession. HGSI also states that quarterly current-asset statements submitted to banks or financial institutions agreed with its books of account.

The Canara Bank security includes stock of raw material, work in progress, finished goods and receivables, plus equitable mortgages over factory land and buildings in Udyog Vihar Phase IV, Gurugram, and Sector 4, IMT Manesar, Gurugram. The certificate also lists personal guarantees from Anil Dass and Brijendra Singh, while noting that Brijendra Singh died on September 30, 2025. Kotak Mahindra Bank’s listed primary security is a fixed-deposit receipt of Rs 33.63 lakh dated August 20, 2025.

HGSI separately reported Rs 81.45 lakh of outstanding non-fund-based facilities as at April 30, 2026. This comprised Rs 79.90 lakh of Canara Bank bank guarantees and Rs 1.55 lakh of Kotak Mahindra Bank bank guarantees; the Kotak letter-of-credit balance was nil. The certificate identifies these as non-fund-based facilities, separating them from the Rs 46.13 lakh fund-based debit total.

How do the two April 2026 disclosures compare?

HGSI’s two April 30, 2026 disclosures show nil debt in the capitalisation statement and Rs 46.13 lakh of debit balances in the secured fund-based facilities table. The difference is one of disclosed classification and presentation in the supplied material. The Canara Bank note is particularly relevant because it says the Rs 1.54 lakh debit balance existed even though the cash-credit limit was not utilised.

The principal unresolved item is the treatment of the Rs 44.59 lakh Kotak Mahindra Bank overdraft debit balance and why the aggregate Rs 46.13 lakh did not appear in the capitalisation statement’s short-term-debt line. HGSI also reports no unsecured loans from any other lender, with no unsecured balance outstanding as at April 30, 2026. That statement distinguishes unsecured loans from the secured bank facilities disclosed in the certificate.

Conclusion

HGSI’s disclosures present two simultaneous views of bank exposure as at April 30, 2026. The capitalisation statement records nil total debt against Rs 100.3283 crore of shareholders’ funds, while the indebtedness certificate lists Rs 46.13 lakh of debit balances within secured fund-based facilities and Rs 81.45 lakh of non-fund-based outstanding facilities.

The next disclosed point to watch is the post-issue capitalisation statement, which HGSI says cannot yet be determined pending completion of the public issue. That later presentation may provide additional context, but the supplied material does not state that it will reconcile the April 30, 2026 debit balances with the nil capitalisation debt figure.