Sonalis UAE unit enters results; auditor lacks evidence

Sonalis Consumer Products Limited included its new UAE IT and agro-tech subsidiary in consolidated results for the half year ended 30 September 2026, reporting revenue from operations of Rs 87.06 crore and profit after tax of Rs 5.91 crore. H. Rajen & Co. said it could not obtain sufficient evidence on the management-certified, unaudited interim figures of that subsidiary.

What did Sonalis launch in the UAE?

Sonalis launched IT and agro-tech services in the United Arab Emirates through its wholly owned subsidiary, Sonalis Consumer Products FZC LLC, during the half year ended 30 September 2026. The filing identifies two reportable segments under Indian Accounting Standard 108, or Ind AS 108: trading of food and consumer products by Sonalis in India, and IT and agro-tech services by the UAE subsidiary.

Sonalis held 100% of Sonalis Consumer Products FZC LLC as at 30 September 2026, and consolidated accounts eliminate intra-group balances, transactions and unrealised profits in full. The UAE operation is also a geographical segment, but the filing gives it no comparative figures because it began operating during the current half year. It does not disclose a separately readable revenue, expense or profit figure for the UAE segment.

The UAE subsidiary is incorporated in the Ajman NuVentures Centre Free Zone and is registered for UAE corporate tax. Based on management's assessment, Sonalis said the entity meets the conditions to be a Qualifying Free Zone Person under UAE corporate-tax rules, making qualifying income for the period taxable at 0%. Sonalis therefore made no UAE corporate-tax provision for the half year ended 30 September 2026.

How did Sonalis's consolidated results compare across periods?

Sonalis reported consolidated revenue from operations of Rs 87.06 crore for the six months ended 30 September 2026, compared with Rs 62.08 crore in the preceding six months ended 31 March 2026 and Rs 87.80 crore in the corresponding six months ended 30 September 2025. The current six-month result includes the UAE segment, while the filing provides no comparable UAE segment data for either earlier period.

Revenue from operations rose by Rs 24.98 crore from the preceding half year, while total expenses increased by Rs 24.97 crore. Profit before tax was consequently Rs 6.42 crore, marginally below Rs 6.44 crore in the six months ended 31 March 2026. Against the corresponding six months ended 30 September 2025, profit after tax increased by Rs 3.31 crore to Rs 5.91 crore.

Sonalis's standalone revenue from operations was Rs 55.61 crore and standalone profit after tax was Rs 1.49 crore for the six months ended 30 September 2026, compared with consolidated figures of Rs 87.06 crore and Rs 5.91 crore respectively. That comparison shows the wider reporting perimeter after consolidation, but it does not establish the UAE unit's individual contribution because no segment profit reconciliation is disclosed.

What changed in Sonalis's balance sheet and cash flow?

Sonalis reported total assets of Rs 130.28 crore at 30 September 2026, up from Rs 48.77 crore at 31 March 2026. Current assets rose to Rs 122.85 crore from Rs 41.20 crore, with trade receivables increasing to Rs 104.87 crore from Rs 31.33 crore and inventories increasing to Rs 13.94 crore from Rs 9.04 crore.

Current liabilities rose to Rs 90.93 crore at 30 September 2026 from Rs 15.51 crore at 31 March 2026. Trade payables accounted for Rs 85.95 crore, compared with Rs 11.27 crore six months earlier, while short-term borrowings increased to Rs 3.08 crore from Rs 2.39 crore. Total equity increased to Rs 39.08 crore from Rs 32.86 crore over the same period.

The consolidated cash-flow statement recorded a Rs 74.68 crore increase in trade payables and a Rs 67.40 crore increase in trade receivables during the six months ended 30 September 2026. Cash generated from operations was negative Rs 90.97 lakh, and net cash used in operating activities was Rs 36.43 lakh after net income tax paid of Rs 54.53 lakh.

Cash and cash equivalents fell to Rs 18.63 lakh at 30 September 2026 from Rs 46.86 lakh at the beginning of the half year. Investing activities generated Rs 13.09 lakh, while financing activities used Rs 4.89 lakh, producing a net decrease in cash and cash equivalents of Rs 28.23 lakh for the period.

What did Sonalis's auditor say about the UAE figures?

Sonalis's statutory auditor said the interim financial information of Sonalis Consumer Products FZC LLC had not been reviewed by any auditor and had been certified by management. H. Rajen & Co. stated that it had not been able to obtain sufficient evidence on those subsidiary figures included in the consolidated results for the half year ended 30 September 2026.

The work was a limited review under Standard on Review Engagements 2410, or SRE 2410, not a full audit. The auditor said such a review mainly involves inquiries of financial and accounting personnel, analytical procedures and other review procedures. It is substantially narrower than an audit and does not provide assurance that all significant matters identifiable in an audit would be identified.

The auditor nevertheless said that, based on its review procedures, nothing had come to its attention suggesting that the consolidated statement did not make required disclosures or contained a material misstatement. Sonalis's board approved the half-year results on 31 October 2026, and the filing says no material events occurred after 30 September 2026 that required adjustment or disclosure.

Sonalis also disclosed that rights-issue proceeds allotted on 7 May 2025 had been fully utilised by 30 September 2026, with no unutilised funds remaining. The Audit Committee reviewed the use of proceeds and deviations or variations against the Letter of Offer objects were submitted separately to stock exchanges in the prescribed format.

Conclusion

Sonalis's results for the half year ended 30 September 2026 are the first consolidated period to include the UAE IT and agro-tech operation. Revenue from operations was Rs 87.06 crore and profit after tax was Rs 5.91 crore, while receivables and payables increased sharply from 31 March 2026 and operating activities used Rs 36.43 lakh of cash.

The central unresolved matter is the reviewer’s inability to obtain sufficient evidence over the management-certified figures of Sonalis Consumer Products FZC LLC. Future disclosures will also need to show whether management's assessment supporting 0% tax on qualifying UAE income continues to apply, as the filing bases that treatment on the subsidiary meeting Qualifying Free Zone Person conditions.