Kanel Industries targets Rs 13 crore for working capital

Kanel Industries Limited plans to deploy Rs 13 crore of projected net rights-issue proceeds towards FY 2026-27 working capital, funding a forecast expansion in receivables and inventory after three years of suspended fresh trading activity. The offer document estimates net proceeds of Rs 16.70 crore, after Rs 30 lakh of issue expenses.

How will Kanel Industries use the rights-issue proceeds?

Kanel Industries proposes to allocate Rs 13 crore of net proceeds to working capital and Rs 3.70 crore to general corporate purposes. The allocation is based on expected gross issue proceeds of Rs 17 crore and estimated issue expenses of Rs 30 lakh, assuming full subscription and completion of the basis-of-allotment process.

The Rs 3.70 crore general-corporate-purpose allocation is below the stated ceiling of 25% of gross proceeds, which equals Rs 4.25 crore on the projected Rs 17 crore issue size. Kanel Industries lists strategic initiatives, growth opportunities, marketing and brand building, ordinary-course expenses and corporate contingencies among possible uses, with management to decide the eventual deployment.

Kanel Industries says a reduction in issue size during finalisation of the issue price or rights-entitlement ratio would be adjusted against the general-corporate-purpose amount. If an amount allocated to the stated objects is under-utilised, it may also move to general corporate purposes, although the total under that category cannot exceed 25% of gross proceeds.

The offer document says the entire requirement for the stated objects will be met from the rights issue, without firm arrangements of finance from other verifiable sources. It also says Kanel Industries had not deployed funds towards the issue objects as of the letter-of-offer date and had not obtained bridge financing for those purposes.

Why does Kanel Industries need Rs 13 crore of working capital?

Kanel Industries projects a working-capital gap of Rs 13.00 crore at March 31, 2027, compared with a negative Rs 2.98 lakh at March 31, 2026. The FY 2026-27 funding schedule identifies Rs 13 crore of rights-issue proceeds as the source for that requirement, with no cash accruals or unsecured loans from directors shown.

The forecast is driven by a projected rise in total current assets to Rs 15.99 crore at March 31, 2027 from Rs 8.15 lakh at March 31, 2026. Trade receivables are forecast to rise to Rs 6.16 crore from Rs 15,000, inventory to Rs 4.93 crore from nil, other current assets and short-term loans and advances to Rs 2.25 crore from Rs 6.24 lakh, and cash to Rs 2.65 crore from Rs 1.91 lakh.

Total current liabilities are projected at Rs 2.99 crore at March 31, 2027, up from Rs 11.13 lakh at March 31, 2026. The FY 2026-27 estimate includes Rs 2.74 crore of sundry creditors and Rs 25 lakh of other current liabilities and short-term provisions, while borrowings are shown as nil.

For March 31, 2028, the projected working-capital gap is again Rs 13.00 crore, while total current assets are estimated at Rs 16.60 crore and total current liabilities at Rs 3.60 crore. The funding-source schedule, however, shows no further rights-issue proceeds, cash accruals or unsecured director loans for FY 2027-28, leaving no separately identified source in that table for the continuing gap.

What assumptions support Kanel Industries' working-capital forecast?

Kanel Industries assumes 90-day holding periods for trade receivables and inventory in both FY 2026-27 and FY 2027-28, alongside 50 days for trade payables. These assumptions mean the projected customer collection and inventory cycles each exceed supplier-credit terms, contributing to the working-capital requirement.

The forecast differs sharply from the preceding three financial years. The offer document says fresh commercial trading activities were suspended during FY 2023-24, FY 2024-25 and FY 2025-26 while the resolution plan was implemented, producing nil revenue from operations and zero operational purchases in those periods.

Kanel Industries reported total income from operations of Rs 3.06 lakh for the year ended March 31, 2026, compared with Rs 51,000 in the preceding year. Net loss after tax and exceptional items was Rs 47.93 lakh in FY 2025-26, versus Rs 5.60 lakh in FY 2024-25, while the working-capital figures are management projections rather than recent operating results.

The document states that the projected fund requirements and deployment have not been appraised by a bank or financial institution. The certification on the working-capital statement also says its assumptions and methodology were not checked, and that actual results may differ from the estimates for the years ending March 31, 2027 and March 31, 2028.

What are Kanel Industries' rights-issue terms and safeguards?

Kanel Industries proposes to issue 42,52,500 rights equity shares at Rs 39.95 each, including a premium of Rs 29.95 per share. Assuming full subscription, issued, subscribed and paid-up equity shares would rise to 2,00,02,500 from 1,57,50,000 before the issue.

The issue also seeks to help meet the 25% minimum public-shareholding requirement. Ardent Ventures LLP held 1,49,62,500 shares, or 95% of the paid-up capital, at June 30, 2026, following conversion of debt into equity under the resolution plan approved by the National Company Law Tribunal on October 23, 2024.

Kanel Industries says the promoter and promoter group will not receive rights entitlements or subscribe to rights shares, including any unsubscribed portion. If the issue is unsubscribed or minimum subscription is not achieved, the Board may dispose of the unsubscribed portion to specific investors, subject to applicable law and its stated assessment of shareholder interests.

Brickworks Ratings India Private Limited has been appointed as monitoring agency for the issue, including the Rs 13 crore proposed for working capital. Kanel Industries says gross proceeds will be held in a separate bank account, monitoring reports will go to the Board until full use, and quarterly disclosures will cover deviations or category-wise variations from the stated objects.

Pending use, Kanel Industries intends to place net proceeds with scheduled commercial banks listed in the Second Schedule to the Reserve Bank of India Act, 1934, or in investments permitted by the Securities and Exchange Board of India. The Board authorised the rights issue on July 30, 2026, while actual issue size and proceeds remain conditional on subscription and allotment.

Conclusion

Kanel Industries' proposed rights issue centres on financing a Rs 13 crore FY 2026-27 working-capital requirement, principally linked to projected receivables of Rs 6.16 crore and inventory of Rs 4.93 crore. The plan marks a shift from the three years in which fresh trading was suspended, but its forecasts rest on management assumptions that have not been externally appraised.

Next, investors can watch the subscription outcome and basis of allotment for the 42,52,500 shares priced at Rs 39.95 each, because the stated deployment assumes full subscription. Subsequent quarterly monitoring and stock-exchange disclosures should show whether use of proceeds and working-capital balances follow the projections for March 31, 2027.