The Company’s Bavla expansion remains unappraised and flexible

The Company’s Rs 107.71 crore Bavla expansion remains unappraised because no bank, financial institution or independent agency has assessed its cost or fund-deployment plan. The project relies on management estimates, purchase and work orders and vendor quotations, while Rs 42.50 crore of net issue proceeds is planned for the facility.

Why is The Company’s Bavla expansion unappraised?

The Company’s Bavla expansion is unappraised because none of the issue objects has been assessed by a bank, financial institution or other independent agency. The Rs 107.71 crore estimate is based on its business plan, prevailing market conditions, purchase and work orders, supplier and contractor quotations, and commercial and technical considerations.

The Company says interest rates, exchange-rate movements, taxes, levies, vendor negotiations, economic conditions and competition could change the funding requirement or deployment schedule. Its Board may revise allocations or defer unspent funds from Fiscal 2027 to a later period in accordance with applicable law, and lower-than-planned spending on an object may be redirected to general corporate purposes within the stated limit.

Plant and machinery represents the largest cost component, accounting for Rs 85.59 crore of the Rs 107.71 crore project estimate. Civil and structural work accounts for Rs 19.67 crore, while electricals and fittings account for Rs 2.44 crore, making the project’s cost outcome particularly dependent on equipment procurement and installation.

How is The Company funding the Bavla expansion?

The Company plans to fund the Rs 107.71 crore Bavla expansion through Rs 42.50 crore of net issue proceeds, Rs 34 crore of secured term loans, Rs 12.42 crore from a private placement of equity shares and Rs 18.79 crore of internal accruals. HDFC Bank Limited sanctioned the Rs 34 crore secured term loan through a letter dated November 29, 2024.

As of June 30, 2026, The Company had deployed Rs 21.23 crore on the project, comprising Rs 15.49 crore from the HDFC Bank loan and Rs 5.74 crore from internal accruals. S. N. Shah & Associates, The Company’s statutory auditor, certified the Rs 5.74 crore internal-accrual deployment in a certificate dated August 21, 2026.

The Company says its arrangements comply with the Securities and Exchange Board of India Issue of Capital and Disclosure Requirements Regulations, or SEBI ICDR Regulations, which require verifiable firm arrangements for 75% of specified funding needs. After excluding proposed issue proceeds and identified internal accruals, The Company calculated funding needs of Rs 59.47 crore and required arrangements of Rs 44.60 crore; its Rs 34 crore term loan and Rs 12.42 crore private placement total Rs 46.42 crore.

The Company says any cost overrun or shortfall in net proceeds would be funded through available means, including incremental debt and internal accruals. Therefore, the planned capital structure depends on the issue allocation, the sanctioned loan and The Company’s ability to use further debt or internally generated funds if actual costs exceed estimates.

What vendor commitments support The Company’s cost plan?

The Company’s cost plan is supported by a mix of purchase orders and vendor quotations, rather than definitive arrangements with every supplier. It states that it has not entered into definitive agreements with some vendors and cannot assure that the same suppliers will provide equipment or services at the quoted cost.

The distinction is material for major equipment packages. Harickson Solutions LLP has a purchase order dated April 25, 2025 for Rs 27.85 crore of India-made sulphur burner and ammonium bisulphite equipment, while A.H. Lundberg Systems & Haricksons (Canada) has a purchase order of the same date for Rs 22.35 crore of imported engineering and equipment. The Rs 21.65 crore sodium metabisulphite system equipment proposal from Harickson Solutions LLP dated August 14, 2026 was valid for 90 days.

The Company has made advances on selected packages, including Rs 8.62 lakh to United Ventures on October 23, 2024 for civil work. It also disclosed advances of Rs 61.50 lakh, Rs 30.86 lakh and Rs 59.07 lakh during 2024 for one equipment package, and Rs 92.85 lakh, Rs 200.44 lakh and Rs 8.30 lakh between April and October 2024 for the imported equipment package.

Quoted amounts may change because of taxes, levies, exchange rates, supplier changes or manufacturer changes, The Company says. It also says equipment quantities reflect current management estimates and that the actual mode of deployment had not been finalised as of the Red Herring Prospectus date, although it does not intend to buy second-hand machinery from net proceeds.

What capacity would The Company’s Bavla expansion add?

The Company expects the proposed Bavla facility to add installed capacity of 78,544 metric tonnes per annum, or MTPA, for sodium meta bisulphite, sodium bisulphite powder or solution and ammonium bisulphite. The facility is planned on Plot Nos. 6 and 7 at Sankalp Industrial Estate, Chiyada, Bavla, on about 17,212.07 square metres of adjacent land.

The Company acquired Plot No. 6 on July 11, 2023 for Rs 1.50 crore and Plot No. 7 on November 16, 2024 for Rs 86.16 lakh, funded from internal accruals. It says no net issue proceeds will be used for land, and the Jilla Vikas Adhikari, Ahmedabad granted non-agricultural permission for industrial use.

The proposed capacity exceeds The Company’s current installed capacity of 36,800 MTPA across its two existing units. At the Vatva unit, Fiscal 2026 production was 17,409 metric tonnes against capacity of 18,800 metric tonnes, representing 92.60% utilisation; the Bavla unit produced 2,702 metric tonnes of sodium sulphite anhydrous against 18,000 metric tonnes of capacity, or 15.01% utilisation, after beginning commercial production in February 2025.

The implementation schedule sets September 2026 to April 2027 for building and civil work, and September 2026 to March 2027 for equipment purchase and commissioning. Trial production is scheduled from April to June 2027, with commercial production planned for June 2027; the facility is expected to require about 1,600 to 1,700 KVA of power and 82 kilolitres a day of water.

How will The Company’s use of issue proceeds be monitored?

The Company has appointed Brickwork Ratings India Private Limited, a SEBI-registered credit rating agency, to monitor use of net proceeds quarterly until the proceeds are fully utilised. The monitoring agency and The Company’s Audit Committee will review utilisation, including amounts assigned to general corporate purposes, under Regulation 262 of the SEBI ICDR Regulations.

This monitoring is different from an independent project appraisal. Brickwork Ratings will monitor use after the issue, while The Company states that its Rs 107.71 crore project estimate, funding requirement and deployment plan were not independently appraised before the issue.

The Company must disclose deviations from the stated objects and category-wise variations in actual use to the stock exchange quarterly or half-yearly, as applicable, under Regulation 32(1) of the SEBI Listing Regulations. A change to the objects themselves requires shareholder approval by special resolution under Section 27 of the Companies Act, 2013.

Pending deployment, The Company may place net proceeds in scheduled commercial banks approved by its Board. It says the funds will not be used to buy, trade or deal in shares of other listed companies, equity-market investments or virtual digital currency while they remain unutilised.

Conclusion

The Company’s Bavla expansion combines a specified Rs 107.71 crore cost plan, Rs 34 crore of sanctioned bank debt and Rs 21.23 crore deployed by June 30, 2026, but it remains dependent on management estimates and some vendor quotations. The Rs 85.59 crore plant-and-machinery allocation makes equipment prices, supplier terms and execution central to whether the planned cost structure holds.

The disclosed schedule calls for civil work from September 2026, trial production from April 2027 and commercial production in June 2027. The next developments to watch are definitive vendor arrangements, any revision to quotations or funding needs, and Brickwork Ratings’ quarterly monitoring reports on deployment of the Rs 42.50 crore planned net-proceeds allocation.