Kanel Industries earmarks ₹13 crore for working capital

Kanel Industries Limited plans to use ₹13 crore of estimated ₹16.70 crore net rights-issue proceeds for FY 2026-27 working capital, broadly matching its projected ₹13.0047 crore working-capital gap as it prepares to scale up commercial trading after three financial years of nil revenue from operations.

How will Kanel Industries use its rights issue proceeds?

Kanel Industries will allocate ₹13 crore to working capital and ₹3.70 crore to general corporate purposes from estimated net proceeds of ₹16.70 crore. Gross proceeds are estimated at ₹17 crore, less ₹30 lakh of issue-related expenses, assuming full subscription and subject to finalisation of the basis of allotment.

The ₹13 crore working-capital allocation represents about 78% of the ₹16.70 crore estimated net proceeds. General corporate purposes account for ₹3.70 crore, while the offer document caps that purpose, including any transfer of under-utilised object funds, at 25% of gross proceeds, or ₹4.25 crore.

Kanel Industries says the issue size will not exceed ₹17 crore. Any reduction caused by finalisation of the issue price or rights-entitlement ratio will be adjusted against the general corporate purpose allocation, rather than the ₹13 crore working-capital requirement.

The company proposes to meet the entire stated funding requirement from net issue proceeds and says no further firm financing arrangements are required for the objects. As of the offer document date, Kanel Industries had deployed no funds toward the stated objects, had not used bridge financing and had no strategic or financial partners for the proposed use of proceeds.

What working-capital build-up does Kanel Industries project?

Kanel Industries projects total current assets of ₹15.9944 crore at March 31, 2027, compared with ₹8.15 lakh at March 31, 2026. The projected asset base includes ₹6.1644 crore of sundry debtors, ₹4.9315 crore of inventory, ₹2.25 crore of other current assets and short-term loans and advances, and ₹2.6485 crore of cash and cash equivalents.

The company projects total current liabilities of ₹2.9897 crore at March 31, 2027, comprising ₹2.7397 crore of sundry creditors and ₹25 lakh of other current liabilities and short-term provisions. The difference results in a projected working-capital gap of ₹13.0047 crore, while projected borrowings are nil.

The FY 2026-27 rights-issue allocation of ₹13 crore is therefore ₹4,700 below the projected ₹13.0047 crore gap. The working-capital schedule identifies rights-issue proceeds of ₹13 crore as the funding source for March 31, 2027 and records nil cash accruals and nil unsecured loans from directors for that year.

For March 31, 2028, Kanel Industries projects current assets of ₹16.5989 crore and current liabilities of ₹3.5977 crore, producing a ₹13.0012 crore working-capital gap. The schedule assigns no additional rights-issue proceeds, cash accruals or unsecured director loans to that later-year gap, and the offer document does not identify another financing source.

Why does Kanel Industries expect receivables and inventory to increase?

Kanel Industries links the projected rise in receivables and inventory to a planned restart and scaling-up of commercial trading operations. It states that fresh commercial trading was suspended during FY 2023-24, FY 2024-25 and FY 2025-26 while the resolution plan was being implemented, resulting in nil revenue from operations and zero operational purchases in all three years.

Management projects receivables of ₹6.1644 crore and inventory of ₹4.9315 crore at March 31, 2027, compared with ₹15,000 of sundry debtors and nil inventory at March 31, 2026. It assumes 90-day holding periods for trade receivables and inventory in both March 2027 and March 2028.

Trade payables are projected at a 50-day holding period for March 2027 and March 2028, compared with an approximate 30-day baseline at March 31, 2026. Kanel Industries says the FY 2025-26 baseline reflected the start of strict credit terms under the new management as business operations began to scale up.

The historic balance-sheet comparison shows total current assets of ₹4.7161 crore and total current liabilities of ₹2.8465 crore at March 31, 2024, leaving a ₹1.8696 crore gap. The reported working-capital gaps then turned negative at ₹6.55 lakh at March 31, 2025 and ₹2.98 lakh at March 31, 2026 before the projected March 2027 expansion.

Kanel Industries reported total income from operations of ₹3.06 lakh for the year ended March 31, 2026, compared with ₹51,000 for the year ended March 31, 2025. Net loss after tax and exceptional items widened to ₹47.93 lakh from ₹5.60 lakh, while the document cautions that actual results may differ from management's FY 2026-27 and FY 2027-28 projections.

What controls apply to Kanel Industries' use of proceeds?

Kanel Industries says its fund requirements and deployment plan are based on its business plan, management estimates and commercial factors, and have not been appraised by a bank or financial institution. Management may reschedule, revise, increase or reduce the planned requirements and use proceeds for all or any stated objects, subject to disclosed limits.

Brickworks Ratings India Private Limited has been appointed as monitoring agency for the issue, including the ₹13 crore proposed for working capital. Kanel Industries will place gross proceeds in a separate bank account and place the monitoring agency's reports before its board until 100% of gross proceeds are used.

The company will disclose unutilised gross proceeds in its balance sheet after receiving listing and trading approvals. Pending use, Kanel Industries says it intends to deposit net proceeds only with scheduled commercial banks listed in the Second Schedule to the Reserve Bank of India Act, 1934, or make investments allowed by the Securities and Exchange Board of India.

Kanel Industries will provide quarterly disclosures to its audit committee on uses and applications of gross proceeds and submit stock-exchange statements of any deviations from the stated objects or category-wise variations. Its statutory auditors will certify the annual statement of funds used for purposes other than those in the offer document until gross proceeds are fully utilised.

A change in the objects generally requires shareholder approval through a special resolution by postal ballot, except in circumstances of business exigencies under applicable law. Kanel Industries also states that, except as disclosed, no proceeds will be paid as consideration to promoters, directors or key managerial personnel.

Conclusion

Kanel Industries' proposed ₹17 crore rights issue is principally structured to fund the balance-sheet needs of resumed trading, with ₹13 crore directed to working capital and a March 2027 asset build-up led by ₹6.1644 crore of receivables and ₹4.9315 crore of inventory. The projected working-capital gap is materially higher than the negative ₹2.98 lakh reported at March 31, 2026.

The next items to watch are the final subscription result and allotment terms, followed by quarterly utilisation disclosures and monitoring reports. Kanel Industries has also projected a ₹13.0012 crore working-capital gap at March 31, 2028 without specifying an additional funding source in the working-capital schedule.