Lorenzini Apparels' FY2025-26 record carries a clean audit opinion, but the year was marked by a mid-tenure auditor resignation, a sustained gap between reported profit and operating cash, and a loan to the Managing Director. The company's profits have not converted to cash for nine years, and its governance is concentrated in the promoter family, which also received a company loan.
Key findings
- Statutory auditor resigned mid-tenure, replacement appointed same day
Major- Mittal & Associates resigned on 11 Aug 2026, citing "pre-occupation in other assignments". The Board appointed A D M S & Associates the same day, subject to shareholder ratification at the 19th AGM. The annual secretarial compliance report for FY2025-26 marks auditor-resignation procedures as "NA". - Reported profits do not convert to operating cash
Major- Cumulative operating cash flow was negative ₹21 crore against ₹20 crore of cumulative profit over the nine years to FY2026. FY2026 operating cash flow was negative ₹14.00 crore against ₹4.35 crore of profit. The company has recommended no dividend in any of the last six years. - Revenue growth has outpaced cash collection
Major- Receivable days rose from 65.90 in FY25 to 100 in FY26. The FY2020-21 auditor flagged revenue recognition as a Key Audit Matter, citing the risk of incorrect timing and management pressure to meet targets. Trade receivables carry credit terms of 90 to 120 days. - Promoter-linked transactions and a loan to the Managing Director
Major- The company sold goods worth 9.27 crore to Mr Button Private Limited in FY2022-23, a firm where Managing Director Sandeep Jain is a director. Shareholders approved a loan limit of ₹1.5 crore to Mr. Jain, repayable on demand at 9.00% interest; the loan outstanding was ₹145.69 lakh. A trademark 'Mr Button' was sold to the same firm for ₹34.09 Lacs, with promoter votes excluded as interested. - Promoter family holds key roles and near-unanimous votes
Major- Managing Director Sandeep Jain and his spouse Deepika Jain, a former Whole-time Director, have held the top executive roles. Shareholder resolutions for independent directors passed with over 99.99% of votes polled, with promoter votes cast in favour. The company granted an interest-bearing, on-demand loan to its own Managing Director. - Small borrowings, but secured by personal guarantees and third-party collateral
Minor- The HDFC Bank working capital loan is secured by company assets, third-party property, and personal guarantees of directors. Unsecured loans in FY2024-25 carried interest rates of 14.00% to 15.00% p.a.. The company disclosed a variance between its stock statements to banks and its books.
What to watch
- Auditor ratification. Shareholder approval of A D M S & Associates' appointment is scheduled for the 19th AGM, per the FY2025-26 annual report notice.
- MD loan repayment. The ₹1.5 crore loan to Mr. Sandeep Jain remains repayable on demand, with no demand made during FY2025-26.
- FY2026-27 cash conversion. The next annual report will show whether operating cash flow turns positive against continued profit growth.
Bottom line: This is a disclosed record with a clean audit opinion. The central risk is that reported profit has not produced cash for nine years, while the promoter family holds both management and related-party transactions, including a loan to the Managing Director. Watch the shareholder ratification of the new auditor and whether the Managing Director's loan is ever demanded for repayment.