Qualiance International Ltd comes to its IPO reporting rising profits, but its operating cash flow turned negative as money became locked in inventory and unpaid customer bills. Four key issues require close attention: a non-cash share issue that wiped out promoter debt before cash flowed back to them, property write-ups that masked a negative net worth, ₹2.13 crore in disputed tax claims alongside promoter tax notices, and an auditor resignation shortly before filing.
Key findings
- Non-cash share issue erased promoter debt before cash moved back
Major- In FY 2023-24, the company issued 84,00,000 equity shares in a rights issue (an offer of new shares to existing owners), settling the full ₹8.4 crore price by canceling loans from directors rather than collecting cash. This converted ₹5.04 crore of debt owed to Vipul Badani and ₹3.36 crore owed to Krupa Rajesh Badani into equity shares. Vipul Badani's balance shifted from ₹9.44 crore owed to him on March 31, 2023 into a net amount he owes the company of ₹(221.09) Lakhs on March 31, 2025 and ₹(377.77) Lakhs on September 30, 2025, while the company paid him cash loan repayments of ₹2.81 crore in FY 2022-23, ₹7.28 crore in FY 2023-24, ₹4.73 crore in FY 2024-25, and ₹2.72 crore in the six months ended September 30, 2025. These balances made up 100% of all long-term loans extended by the company. Related-party transactions (deals with the promoters' own entities) included ₹2.25 crore of sales and ₹2.03 crore of labour charges paid to Silvertraq International Private Limited in FY 2024-25, alongside pay hikes to three director relatives to ₹18.00 Lakhs each for the half year ended September 30, 2025 from ₹12.00 Lakhs each for full prior years. - Property write-ups masked negative net worth alongside restatements and bank gaps
Major- The company wrote up the book value of its land, buildings, and offices by ₹6.99 crore in FY 2022-23 and ₹4.82 crore in FY 2023-24, creating revaluation reserves (an accounting increase in value without new cash) of ₹10.26 crore by September 30, 2025. Before these adjustments, net worth (what remains when total debts are subtracted from total assets) stood at negative ₹(231.53) Lakhs as of March 31, 2023 due to accumulated past losses. Restatements (previously reported accounts corrected and re-presented) had to fix errors in gratuity accounting, unrecorded goods in transit, depreciation wrongly charged on land, and missing foreign exchange rates. Auditors noted the company had no internal audit system across FY 2022-23, FY 2023-24, and FY 2024-25, and stock statements sent to banks showed material gaps against company books, including a ₹5.19 crore inventory mismatch in September 2025 and a ₹(318.45) Lakhs customer debt difference in June 2025. - Disputed tax demands reach ₹2.13 crore alongside promoter reassessment notices
Major- The company faces 9 disputed tax proceedings totaling ₹2.13 crore, consisting of 8 goods and services tax matters and 1 direct tax dispute. The goods and services tax notices demand ₹48.63 Lakhs for FY18, ₹32.56 Lakhs for FY19, ₹24.87 Lakhs for FY20, ₹81.76 Lakhs for FY21, and ₹25.08 Lakhs for FY22 over disallowed tax credits, reverse charges, and alleged under-reported turnover. Promoter and director Vipul Badani is also undergoing income tax reassessment for assessment year 2019-20 over a ₹20.75 Lakhs demand regarding an alleged fictitious loan from Rati Diamonds Pvt. Ltd.. Tax authorities also issued him a notice for assessment year 2014-15 alleging ₹1.24 crore of escaped income linked to accommodation entries (paper-only accounting entries) and bogus transactions from Shripal V. Vora. - Auditor resigned before filing while lender approval and filings lagged
Major- Statutory auditor Mehta Doshi & Associates resigned on October 13, 2025, leading to the appointment of R K Jagetiya & Co on October 22, 2025 to fill the casual vacancy. A ₹4.9 crore working capital loan sanctioned by L&T Finance Limited in May 2024 was not registered with the Registrar of Companies within statutory deadlines, leaving the registration pending since June 08, 2024, and the lender has not provided a No Objection Certificate for the IPO as of the draft offer document date. Secretarial gaps include missing past disclosures on workplace safety and related-party deals, missing cash flow statements for FY 2014-15, a promoter group entity that has not filed annual returns since 2018, untraceable labor welfare registration letters, and unregistered "QUALIANCE" trademark applications filed on December 04, 2025. - Operating cash flow turned negative as inventory and unpaid bills surged
Minor- Net cash flow from operating activities fell to negative ₹(445.08) Lakhs in FY 2024-25 and negative ₹(60.06) Lakhs in the six months ended September 30, 2025, even as restated profit after tax grew to ₹4.9 crore and ₹5.49 crore in those periods. Cash was tied up by a ₹(1,466.35) Lakhs inventory increase in FY 2024-25 and a ₹(1,065.48) Lakhs jump in unpaid customer bills during the six months ended September 30, 2025. Trade receivables (uncollected sales bills) rose from ₹2.07 crore on March 31, 2025 to ₹13.23 crore on September 30, 2025 without any provision for bad debts, while inventory climbed from ₹14.87 crore on March 31, 2024 to ₹27.41 crore on September 30, 2025. Cheques issued exceeded bank balances by ₹1.97 crore on September 30, 2025. - High customer and export concentration on short-term purchase orders
Minor- A single customer contributed 41.02% of sales in the period ended September 30, 2025 and 51.51% in FY 2024-25, while the top 5 buyers brought in 97.52% and the top 10 brought in 100% of sales. Switzerland accounted for 74.88% of revenue in the half year ended September 30, 2025 and 58.87% in FY 2024-25, with overall exports generating 99.83% of sales in the latest half year. The company holds no long-term contracts and sells solely through purchase orders. Its accounting policy recognizes export revenue when goods leave Indian ports, even when underlying sales contracts specify delivery at foreign customer destinations. - Factory expansion lacks bank appraisal, firm orders, and monitoring agency
Minor- The company has earmarked ₹31.35 crore from fresh issue proceeds for a new Tiruppur plant out of an estimated ₹34.37 crore budget, but no commercial bank or financial institution has appraised the project. No purchase orders have been placed for ₹12.71 crore in plant machinery or ₹21.66 crore in civil works, with costs based entirely on non-binding vendor quotations. Because the issue size is under ₹50 crore, regulations do not require an independent monitoring agency to oversee how funds are spent, and no alternative financing has been arranged if IPO proceeds fall short.
What to watch
- Civil work quotation validity. The ₹21.66 crore civil work quote from Integrated Engineering Vaasthu for the Tiruppur facility was set to expire on June 23, 2026.
- Machinery quotations. Price quotes for sewing machines (₹5.36 crore), solar systems (₹1.62 crore), and cutting machines (₹1.54 crore) were valid until May 16, 2026 and June 16, 2026.
- Site development and municipal approvals. Site development and municipal clearances for the Tiruppur project were scheduled for completion by June 2026.
- Commercial rollout. Trial runs and commercial production at the new Tiruppur plant were scheduled to commence in March 2027.
- Auditor peer review status. The peer review certificate of statutory auditor R K Jagetiya & Co. is valid until June 30, 2027.
Bottom line: This company shows expanding top-line revenue, but its profits have not converted into operating cash, leaving liquidity dependent on short-term customer collections and bank balances. The core business faces heavy geographic concentration in Switzerland, alongside historical book adjustments and ongoing tax inquiries involving the promoter. Investors should monitor whether the company secures lender clearance and executes its unappraised Tiruppur plant on schedule.