Avax Apparels and Ornaments Ltd's record carries clean audit opinions in both years, but the cash story underneath is weak: cumulative operating cash flow is negative against positive profit, receivables are swelling, and the company has authorised itself to borrow and mortgage far beyond what its books show. The auditor's own going-concern language flipped from a warning to a clean statement with no improvement in cash flows to explain it.
Key findings
- Revenue is growing but not converting to cash, and receivables keep swelling
Major- Revenue rose from ₹22.06cr in FY24 to ₹34.36cr in FY25 to ₹41.53cr in FY26, yet cumulative operating cash flow over eight years is negative ₹3cr against cumulative profit of ₹7cr. Gross trade receivables more than doubled from ₹306.26 Lacs at March 31, 2024 to ₹675.30 Lacs at March 31, 2025. The company explicitly states it "has NOT applied expected credit loss model as per Ind AS 109" for trade receivables, using historical experience instead. - Shareholders approved borrowing up to ₹20 crore and mortgaging all assets for "any third party"
Major- Members approved a special resolution on 30 August 2025 to raise the borrowing limit under Section 180(1)(c) to ₹20 crore, up from ₹5 crore approved in December 2022. The same meeting approved creating a mortgage on movable and immovable properties to secure borrowings of "the Company or any third party," with secured indebtedness not exceeding ₹20 crore. Reported total borrowings as of FY2025-26 were only ₹4.11 crore, all short-term. - Promoter group restructured shareholding in December 2025, with one disclosure showing a zero post-acquisition holding
Major- On 08/12/2025, Deepak Kumar acquired 322,074 shares (30.99%) via inter-se transfer, with no prior holding. Harish Kumar's disclosure shows a pre-acquisition holding of 218,084 shares (20.99%) and an acquisition of the same 218,084 shares (20.99%), leaving his total unchanged. Deepika's disclosure shows a pre-acquisition holding of 103,990 shares (10.01%) and an acquisition of the same amount, with post-acquisition holding of 0 shares. - Audit opinions are clean, but the auditor's going-concern clause flipped from a warning to a clean statement
Major- NKSC & Co. issued unqualified opinions for both FY2025-26 and FY2024-25. The CARO clause on going concern stated "material uncertainty exists" in FY25 but "no material uncertainty exists" in FY26. The company "did not have an internal audit system" in either year, despite the auditor also opining that internal financial controls were adequate. - Statutory auditor resigned mid-tenure over its own regulatory ineligibility
Minor- Arvind Manoj and Associates resigned effective 11 March 2025 because it had not undergone mandatory peer review and could not issue limited review reports. The board appointed CA Priyank Goyal of NKSC & Co. on 25 April 2025 to fill the casual vacancy. Shareholders ratified the appointment with 594,911 votes in favour (100%) at the 30 August 2025 AGM. - No material regulator orders, but late filings and a self-admitted error to BSE
Minor- The Secretarial Audit Report dated 24 August 2026 notes one late intimation of an Independent Director resignation and one delayed Form CHG-1 filing. On 14 November 2025, the company admitted to BSE that financial results filed under Regulation 33 contained discrepancies, and said it was rectifying the Limited Review Report. The Board's Report states no significant or material orders were passed by regulators impacting going concern.
What to watch
- Borrowing drawdown. Whether Avax draws down up to the newly approved ₹20 crore limit, and whether any third-party borrowings get secured against company assets, per the 30 August 2025 resolutions.
- Deepika's holding discrepancy. Any further SEBI SAST disclosures following the 08/12/2025 inter-se transfers, including why her post-acquisition holding shows 0 shares despite acquiring 103,990.
- Salary increase sustainability. The next remuneration annexure for FY2026-27, to see whether the 46.75% average salary increase for non-managerial employees in FY2025-26 is sustained.
- AGM voting pattern. The FY2025-26 AGM resolutions, including re-appointment of Mr. Harinderpal Singh Sodhi as Joint Managing Director, after the 30 August 2025 AGM saw 100% approval from just 8 members.
Bottom line: This is a disclosed record with clean audit opinions, but the cash conversion is weak, the receivables are growing faster than sales, and the company has authorised borrowing and mortgage capacity five times its reported debt. The risk is that the clean opinions mask a deteriorating cash position, and the December 2025 shareholding restructure carries a disclosure discrepancy worth tracking. Watch the borrowing drawdown and the next AGM vote.