Pasari Spinning Mills faces material going-concern uncertainty

Pasari Spinning Mills Limited reported no revenue from operations for the six months ended September 30, 2026, and posted a Rs 6.46 lakh loss. With net worth of Rs 26.91 lakh and related-party borrowings of Rs 1.35 crore, its auditor identified a material uncertainty that may cast significant doubt on its ability to continue as a going concern.

Why does Pasari Spinning Mills face a going-concern uncertainty?

Pasari Spinning Mills faces the uncertainty because it had no operating revenue in the September 2026 quarter or the six months ended September 30, 2026, while recording a Rs 6.46 lakh half-year loss. The auditor drew attention to the financial-results note and said these conditions indicated a material uncertainty that may cast significant doubt on the company’s ability to continue as a going concern.

At September 30, 2026, Pasari Spinning Mills had reserves and surplus of negative Rs 13.53 crore against paid-up equity share capital of Rs 13.80 crore, resulting in net worth of Rs 26.91 lakh. It also reported unsecured related-party borrowings of Rs 1.35 crore. The auditor said the company was dependent on funding from related parties, although its limited-review conclusion was not modified for the matter.

The board nevertheless prepared the September 2026 results on a going-concern basis. Its stated reasons were continued financial support from promoters and related parties, their confirmation that loans would not be called until the company could repay them, plans to commence or resume operations, and expected asset realisations including a deferred-tax asset of Rs 1.33 crore. The filing says no adjustments were made for a possible inability to continue as a going concern.

What were Pasari Spinning Mills’ six-month financial results?

Pasari Spinning Mills moved to a Rs 6.46 lakh loss for the six months ended September 30, 2026, from a Rs 20.20 lakh profit in the corresponding six months of 2025. Total income fell to Rs 1.43 lakh from Rs 32.32 lakh, while total expenses declined to Rs 7.89 lakh from Rs 12.12 lakh. The lower income base drove the shift from profit to loss.

The company recorded no revenue from operations in either the quarter ended September 30, 2026 or the six months then ended. The Rs 1.43 lakh of half-year income included Rs 1.38 lakh recognised in the June 2026 quarter through adjustment of repair and maintenance expenses against a tenant’s security deposit, according to the auditor. In the September 2026 quarter, total income was Rs 0.01 lakh and the loss was Rs 2.84 lakh.

Pasari Spinning Mills said it had only one reportable segment under Indian Accounting Standard 108, which covers operating-segment disclosures. It therefore did not provide a segment-wise breakdown of the Rs 6.46 lakh half-year loss. The comparative six-month profit in 2025 reflected income exceeding expenses by Rs 20.20 lakh, whereas expenses exceeded income by Rs 6.46 lakh in the latest period.

Is Pasari Spinning Mills earning rent from its factory building?

No, Pasari Spinning Mills’ factory building has remained vacant since February 2026, and no rental income was earned or recognised in the quarter ended September 30, 2026. The auditor disclosed the vacancy as an other matter in its October 30, 2026 limited-review report, providing a stated reason for the absence of rent during the September quarter.

The filing separates the vacancy from the Rs 1.38 lakh recorded during the six months ended September 30, 2026. That amount was recognised in the June 2026 quarter through an adjustment of repair and maintenance expenses against the former tenant’s security deposit, rather than as rent from an occupied property. The September-quarter total income was only Rs 0.01 lakh.

Investment property was reported at Rs 25.57 lakh at September 30, 2026, unchanged from March 31, 2026. Other financial assets were Rs 64.17 lakh, while deferred-tax assets were Rs 1.33 crore. Although the board cited expected asset realisations in using the going-concern basis, the filing gives neither a timetable nor a projected amount for those realisations.

What is the status of Pasari Spinning Mills’ Cotton Corporation dispute?

Pasari Spinning Mills remains involved in arbitration and legal appeals with Cotton Corporation of India Limited over cotton purchases and related claims. Execution proceedings initiated during the year sought recovery of alleged dues of Rs 7.03 crore, and a sale proclamation was issued for certain immovable properties before the Commercial Court at Mysuru.

The High Court of Karnataka granted an interim stay of the execution proceedings on January 6, 2026, and the matter remained pending adjudication at the date of the auditor’s report. The stay halted execution at that stage, but the filing does not state that the underlying claims, arbitration proceedings or subsequent appeals have been resolved.

Pasari Spinning Mills had fully provided Rs 63.90 lakh for security deposits given to Cotton Corporation of India in earlier years because of uncertainty around the matter. The remaining disputed amount of Rs 6.39 crore was disclosed as a contingent liability pending the legal outcome. The Rs 7.03 crore recovery action therefore remains relevant alongside the company’s Rs 26.91 lakh reported net worth.

How is Pasari Spinning Mills funding operations and managing governance changes?

Pasari Spinning Mills received Rs 6.50 lakh in net unsecured related-party loan funding during the six months ended September 30, 2026, according to its cash-flow statement. Cash and cash equivalents fell to Rs 11.04 lakh at September 30 from Rs 14.47 lakh at March 31, 2026, as operating activities used Rs 12.99 lakh and investing activities generated Rs 0.01 lakh.

The Rs 6.50 lakh financing inflow came alongside Rs 1.35 crore of related-party borrowings at September 30, 2026. The board said promoters and related parties had confirmed they would not demand repayment until Pasari Spinning Mills was in a position to repay. The filing does not disclose an operating-revenue target or a date for resuming operations.

The auditor also observed that the chief financial officer had not signed the September 2026 financial statement, while noting the signature requirement under Section 134 of the Companies Act, 2013 where officers are appointed. Separately, on October 30, 2026, Prem Bharath Bist became an additional non-executive, non-independent director and chairperson after Kolagunda Kumar Siddappa resigned as chairman for personal reasons.

Conclusion

Pasari Spinning Mills’ filing combines six months without operating revenue, a Rs 6.46 lakh loss, a vacant factory building and net worth of Rs 26.91 lakh. The auditor’s material-uncertainty disclosure does not modify its review conclusion, but it identifies related-party funding dependence, accumulated losses and the absence of operating revenue as central to the going-concern assessment.

Next, readers should watch for progress on Pasari Spinning Mills’ stated plan to commence or resume operations and for any evidence of asset realisation, including the Rs 1.33 crore deferred-tax asset. The pending adjudication of the Rs 7.03 crore recovery action, the factory building’s vacancy since February 2026 and the continuing availability of related-party support will remain material to the position.