Active Clothing Co Ltd Forensic Report - SOIC x StockScans Report

as of Sep 2026

Active Clothing Co Ltd's audit record is clean on its face: seven straight years of unqualified opinions and clean CARO responses. But the company is funding a ₹150-200 crore expansion through supplier credit with undisclosed terms, its operating cash flow has covered less than half of EBITDA over a decade, and its statutory auditor resigned mid-term in October 2024.

Key findings

  1. A ₹150-200 crore supplier-funded expansion with undisclosed terms Major - Management stated in the Q2 FY26 transcript (Sep 2025) that 600 new machines, costing "around 150 to 200 Crores," will be funded by the supplier on "five-year deferred payment" terms, with no interest rate, security, or funding plan for the balance disclosed. Existing borrowings are "repayable on demand" and secured by substantially all assets and director guarantees. Shareholders in FY2023-24 approved borrowing powers up to ₹500 crore plus reserves, which could include inter-corporate deposits and commercial paper.
  2. Operating cash flow covers only 48% of EBITDA over a decade Major - Cumulative CFO of ₹75 crore covered just 0.48x cumulative EBITDA of ₹154 crore over ten years, with CFO swinging from negative ₹10.37 crore in FY2024-25 to positive ₹13.81 crore in FY2025-26. Capital advances jumped \~14x to 10.67 crore in FY2022-23 from ₹76.00 lakh the prior year. The company skipped dividends for two straight years citing "continuous expansion activities," while a ₹60 crore capex plan was described as "in process" with no milestones or cost-to-date disclosed.
  3. Statutory auditor resigned mid-term in October 2024 Major - Swarn K Jain & Co, appointed for a five-year term in September 2023, resigned effective 08.10.2024 citing "Surrender of Certificate of Practice". Shareholders at an EGM on 11.11.2024 approved Kapoor Rajesh & Associates to fill the casual vacancy. The new auditor was later appointed for a full five-year term and issued an unqualified opinion for FY2025-26.
  4. Accounting policies have shifted repeatedly across years Major - Depreciation moved from straight-line in FY2022-23 to written-down value in FY2021-22 and FY2025-26. The company stated it "has not provided for" gratuity as required by IAS-19 in three consecutive years, FY2019-20 through FY2021-22. Government grants were recognized on receipt in FY2020-21 but as a deduction from asset carrying value in FY2025-26, and prior-year figures were regrouped without quantified impact.
  5. A husband-wife promoter pair dominates the board Major - Rajesh Kumar Mehra and his wife Renu Mehra held 10,340,415 equity shares together as of 31 March 2026, with no other related directors. Shareholders approved a preferential warrant issue of 20,00,000 warrants at an EGM held on 26 February 2026, and the company allotted the warrants on 18 March 2026, with post-allotment promoter group holding at 73.58% undiluted. The Board's Report excludes per-person remuneration details from the circulated Annual Report, making them available only for inspection.
  6. A GST dispute crystallised from ₹4.17 crore notice to ₹58.69 lakh order Minor - A show-cause notice of ₹4.17 crore for FY2020-FY2024 was issued on 26.09.2025. A confirmed order on 02.03.2026 ascertained tax of ₹30.52 lakh plus penalty of ₹28.16 lakh. The company deposited partial amounts and is contesting the order in the High Court.
  7. Revenue recognition shifted to Ind AS 115, but receivables days stayed high Minor - Revenue recognition moved from invoice-based in FY2020-21 to control-based per Ind AS 115 in FY2023-24. Receivable days were 128 in FY2024-25 and 133 in FY2025-26. Management's oral assurances on receivables in the Q2 FY26 transcript provided no actual day counts or aging figures.
  8. Seven consecutive years of unqualified audit opinions Clean - The statutory auditor issued unqualified opinions for every year from FY2019-20 through FY2025-26. CARO responses for FY2025-26 confirmed no fraud, no wilful default, no repayment default, and no cash losses. The secretarial audit report also carried no qualification.

What to watch

Bottom line: This is an audited record with a clean opinion streak and no fraud or default flags. The risk is structural: a major expansion funded by undisclosed supplier credit, layered on demand-repayable debt, with cash flow that has historically covered less than half of operating profit. Watch the supplier financing terms, the capex milestones, and whether the positive FY2025-26 cash flow sustains.