Loyal Textile Mills flags SEBI breach over unreviewed results

Loyal Textile Mills Limited disclosed that its consolidated results for the half year ended 30 September 2026 included Rs 9.114 crore of profit from a material foreign joint venture based on interim financial information not reviewed by that venture’s auditors, resulting in non-compliance with SEBI Regulation 33(3)(h).

Why did Loyal Textile Mills disclose a SEBI consolidation breach?

Loyal Textile Mills disclosed the non-compliance because it consolidated Gruppo P&P Loyal Spa, its overseas joint venture, using management-prepared financial results that had not been reviewed or audited. Brahmayya & Co., in its review report dated 12 November 2026, drew attention to Note 6, which describes non-compliance with Regulation 33(3)(h) of the Securities and Exchange Board of India, or SEBI, Listing Obligations and Disclosure Requirements Regulations, 2015.

The auditor’s conclusion was not modified for the matter, but the review report distinguishes that outcome from a review of the joint venture’s underlying information. Brahmayya & Co. said its review covered the consolidated statement for the quarter ended 30 September 2026 and the period from 1 April 2026 to 30 September 2026, while the joint venture information used in that statement had not been reviewed by its own auditors.

How much unreviewed joint-venture profit was consolidated?

Loyal Textile Mills included Rs 2.6671 crore as its share of the foreign joint venture’s total net profit after tax and total comprehensive income for the quarter ended 30 September 2026, and Rs 9.114 crore for the half year ended that date. The auditor said this interim financial information was material to Loyal Textile Mills and that its conclusion on these amounts relied solely on information supplied by management.

The consolidated financial results present rounded joint-venture profit of Rs 2.67 crore in the September 2026 quarter and Rs 9.11 crore for the half year. The more precise Rs 266.71 lakh and Rs 911.40 lakh amounts appear in the auditor’s other-matter paragraph and are specifically identified as amounts arising from unreviewed interim information.

Loyal Textile Mills’ reported joint-venture share for the September quarter was Rs 3.78 crore below the Rs 6.45 crore reported in the June 2026 quarter and Rs 1.31 crore below the Rs 3.98 crore reported in the September 2025 quarter. For the half year, the reported Rs 9.11 crore contribution was Rs 3 crore below Rs 12.11 crore in the half year ended 30 September 2025.

How did the joint venture affect Loyal Textile Mills’ results?

Loyal Textile Mills reported a consolidated loss before exceptional items and tax of Rs 5.66 crore for the quarter ended 30 September 2026 before recording the Rs 2.67 crore share of joint-venture profit. After including that share, the loss before exceptional items and tax was Rs 2.99 crore, showing that the joint venture narrowed the reported pre-exceptional loss by its reported contribution.

For the half year ended 30 September 2026, Loyal Textile Mills’ loss before exceptional items and tax was Rs 15.66 crore before its Rs 9.11 crore joint-venture share. The loss reduced to Rs 6.55 crore after the contribution, but remained negative before exceptional items and tax.

Exceptional items of Rs 3.36 crore in the September quarter and Rs 5.70 crore in the half year also affected the reported outcome. Loyal Textile Mills recorded Rs 70 lakh profit after tax from continuing operations in the September quarter and Rs 39 lakh for the half year, while discontinued operations produced losses of Rs 63 lakh and Rs 1.81 crore respectively.

What do Loyal Textile Mills’ consolidated results show?

Loyal Textile Mills reported consolidated profit after tax of Rs 8 lakh for the quarter ended 30 September 2026, compared with a loss of Rs 11.34 crore in the quarter ended 30 September 2025. For the half year, it reported a loss after tax of Rs 1.42 crore, compared with a loss of Rs 28.35 crore in the corresponding 2025 period.

Revenue from operations was Rs 90.67 crore in the September 2026 quarter, compared with Rs 86.06 crore in the June 2026 quarter and Rs 105.87 crore a year earlier. Half-year revenue declined to Rs 176.73 crore from Rs 235.98 crore in the half year ended 30 September 2025, while total expenses fell to Rs 194.40 crore from Rs 281.37 crore.

At 30 September 2026, Loyal Textile Mills reported Rs 530.13 crore of total assets and Rs 202.71 crore of total equity. Current borrowings fell to Rs 171.18 crore from Rs 215.60 crore at 31 March 2026, while non-current borrowings were Rs 36.31 crore at 30 September 2026 against no reported non-current borrowing balance at the March year-end.

What has management said about operations and liquidity?

Loyal Textile Mills said management is rationalising operations, prioritising high-value-contribution segments, pursuing cost optimisation and monetising assets to target operational profitability. The auditor’s emphasis-of-matter paragraph says Loyal Textile Mills’ ability to achieve operational profits is completely dependent on successful implementation of these initiatives amid continuing operational losses, suboptimal capacity utilisation and market conditions affecting liquidity.

Loyal Textile Mills also said it has identified further underutilised and non-core assets for monetisation, including assets classified as held for sale, to reduce debt, strengthen liquidity and improve cost efficiency. The consolidated balance sheet showed Rs 14.58 crore of non-current assets classified as held for sale at both 30 September 2026 and 31 March 2026.

The half-year cash-flow statement recorded Rs 6.28 crore of proceeds from the sale of fixed assets and cash and cash equivalents of Rs 13.32 crore at 30 September 2026, compared with Rs 52 lakh at 31 March 2026. Management said progress in operational improvement and liquidity enhancement supports its confidence in achieving sustainable operational profitability in the near future.

Conclusion

Loyal Textile Mills’ disclosure combines a regulatory consolidation issue with a material reported earnings contribution: Rs 9.114 crore of half-year foreign joint-venture profit was incorporated using information not reviewed by that venture’s auditors. Brahmayya & Co. did not modify its review conclusion, but specifically highlighted the Regulation 33(3)(h) non-compliance and its reliance on management-furnished interim information.

The next disclosed matters to watch are Loyal Textile Mills’ implementation of manufacturing rationalisation, cost measures and asset monetisation, including the Rs 14.58 crore held-for-sale asset balance at 30 September 2026. Management has linked those actions to debt reduction, liquidity improvement and its target of sustainable operational profitability, while the auditor has said that outcome depends on successful execution.