Purple Style Labs Ltd Forensic Report - SOIC x StockScans Report

as of Sep 2026

Purple Style Labs comes to its IPO with expanding fashion retail revenues and a recognizable designer brand network. Several financial realities require attention: the group has incurred continuous operating cash drains leading to an accumulated deficit of ₹423.05 crore, relies on high-cost short-term debt reaching up to 18% interest, and plans to direct ₹363.29 crore of fresh IPO funds into an insolvent retail subsidiary with fully depleted net assets.

Key findings

  1. Accounting software logs were disabled alongside recurring multi-year cash losses Major - The statutory examiners noted that the audit trail (the software log tracking who enters or edits financial transactions) was not enabled at the database level for sales, purchases, and inventory systems for over seven months in FY25, after being disabled for all of FY24. Standalone cash losses reached ₹90.31 crore in FY25 and ₹16.89 crore in FY22, while retail subsidiary PSL Retail Private Limited suffered cash losses for four consecutive years totaling over ₹104 crore. Neither entity conducted physical counts of property, plant, and equipment during FY23, and the subsidiary ran overdue tax interest arrears for more than six months.
  2. Persistent cash drain and accumulated losses funded by unappraised IPO money Major - The group suffered negative operating cash flows in each of the past three fiscal years, burning ₹45.19 crore in FY25, ₹31.34 crore in FY24, and ₹44.19 crore in FY23. Accumulated losses reached ₹423.05 crore by March 31, 2025, driven by restated net losses (past accounts re-examined and updated) of ₹188.55 crore in FY25. Core operating arm PSL Retail holds negative net worth of ₹185.60 crore, yet the company plans to funnel ₹363.29 crore of fresh IPO proceeds to pay its store leases through FY29 based entirely on internal management forecasts without bank appraisal.
  3. Short-term debt surged with interest rates reaching up to 18% Major - Total debt jumped to ₹238.01 crore by September 15, 2025, made up of ₹157.43 crore in secured debentures (loan bonds) and ₹78.5 crore in short-term corporate deposits. The entire ₹112.79 crore in borrowings reported at March 31, 2025 was due within a single year, carrying annual interest charges between 15.00% and 18.00% for tenors as short as four months. Annual finance costs rose to ₹52.97 crore in FY25, creating negative interest coverage of (0.24)x, while the retail subsidiary failed to set up a debenture redemption reserve (a ring-fenced fund required to repay bondholders) because it made no profit.
  4. Board directors face insolvency fraud claims, tax notices, and defaulter records Major - Non-executive directors Rahul Garg and Harminder Sahni appear in the CIBIL defaulter database relating to outside companies where they held board seats. Insolvency officials have filed claims at the NCLT (the National Company Law Tribunal, India's court for corporate insolvency) against Garg, alleging failure of oversight and the diversion of ₹19.42 crore to related parties at Future Group entities. Garg faces income tax prosecution show-cause notices for ₹55.91 crore of unpaid deducted tax, while Sahni faces pending criminal cases alleging cheating, copyright violations, and breach of trust.
  5. Regulators examine unapproved private placements and repeated filing delays Major - The company and its promoters submitted an application on September 15, 2025 to the Registrar of Companies (the government registry for corporate records) to settle legal violations from a ₹0.5 crore private share sale. The company issued private placement offer letters before filing required regulatory documents, delayed formal return filings by 18 days, failed to maintain a separate bank account, and spent investor proceeds prematurely. These follow earlier foreign exchange reporting delays of up to nearly three years that required a settlement order from the Reserve Bank of India in August 2020.
  6. Promoters fully paid shares right before a 999:1 bonus issue Major - Promoter Abhishek Agarwal and director Abhinav Agarwal held rights shares that remained partly paid at ₹9 per share until paying them up in full on June 24, 2025, just weeks before a 999:1 bonus issue gave them 999 free shares for every single share held. The company booked ₹122.77 crore in employee share-option expenses in FY25, with another ₹93.67 crore scheduled for FY26, including grants of 1% or more of share capital to promoter family members. Company leadership received ₹0.73 crore in consulting fees in FY25 and retain the right to sell their new option shares within three months of listing.
  7. Unvalued brand acquisitions led to goodwill write-offs and rising dead stock Minor - The company purchased brand names including Pernia's Pop-Up Shop, Wendell Rodricks, and Hemant Trevedi without obtaining independent valuation reports. In FY25, it wrote off the entire ₹1.45 crore goodwill (the premium paid over a business's measurable asset value) for the Rodricks and Trevedi brands due to declining sales and cash flows. Total inventory expanded to ₹160.34 crore with ₹10.53 crore set aside for obsolete stock, stretching working-capital days (the time cash stays locked in unsold stock and unpaid bills) from 45.28 days to 123.57 days.

What to watch

Bottom line: This is an expanding multi-brand luxury retail business that has accumulated heavy operating losses and relies on expensive, short-tenor borrowings. The primary financial risk lies in whether the ₹363.29 crore of fresh IPO equity diverted to its net-worth-negative retail subsidiary can stabilize store lease commitments without further diluting returns. Keep a close eye on the outcome of the RoC private placement adjudication and the upcoming ₹93.67 crore employee stock option charge.