Katare Spinning Mills Ltd Auditor Reports

To,

The Members of Katare Spinning Mills Limited

Report on the Audit of the Standalone Financial Statement

Opinion

We have audited the accompanying standalone financial statements of KATARE SPINNING MILLS LIMITED ("the Company”), which comprise the Balance Sheet as at 31st March 2026, the Statement of Profit and Loss including Other Comprehensive Income, the Statement of Changes in Equity, the Cash Flow Statement for the year then ended and notes to the standalone financial statements including material accounting policies and other explanatory information.

In our opinion and to the best of our information and according to the explanations given to us, except for the possible effects of the matters described in the Basis for Qualified Opinion paragraph below, the aforesaid standalone financial statements give the information required by the Companies Act, 2013 ("the Act”) in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015 as amended and other accounting principles generally accepted in India, of the state of affairs of the Company as at 31st March 2026, and its loss, total comprehensive income, changes in equity and cash flows for the year ended on that date.

Basis for qualified Opinion

The Companys spinning division has remained substantially non-operational for a prolonged period, and the Company has incurred continuous net losses, including a net loss of Rs. 2,16,43,306 for the year ended March 31,2026.

Further: As disclosed in Note 8 to the standalone financial statements, the Company carries a Net Deferred Tax Liability of Rs. 78,87,000 as of March 31, 2026 (increased from Rs. 19,80,000 as of March 31, 2025). Management has stated that Deferred Tax Assets relating to carried forward financial losses and unabsorbed depreciation have not been recognized due to the absence of virtual certainty supported by convincing evidence regarding future taxable income.

However, because the Company has not completed a comprehensive impairment testing of its underlying Property, Plant, and Equipment under Ind AS 36, and given the prolonged non-operational status of its core manufacturing business, the timing differences, carrying values of temporary tax differences, and the absolute recoverability of the net tax positions cannot be satisfactorily evaluated under Ind AS 12.

Consequently, we are unable to comment upon the potential adjustments that may be necessary regarding the Net Deferred Tax balances and their resultant impact on the accumulated Retained Earnings and Net Loss reported in the standalone financial statements.

We conducted our audit in accordance with the Standards on Auditing (“SAs”) specified under section 143(10) of the Companies Act, 2013. Our responsibilities under those Standards are further described in the Auditors Responsibilities for the Audit of the Standalone Financial Statements section of our report.

We are independent of the Company in accordance with the code of Ethics issued by the Institute of Chartered Accountants of India together with ethical requirements relevant to our audit under provisions of the Companies Act, 2013 and Rules made thereunder and we have fulfilled our ethical responsibilities in accordance with these requirements and the Code of Ethics.

We believe that audit evidence obtained by us is sufficient and appropriate to provide a basis for our qualified opinion.

Material Uncertainty Related to Going Concern

The Companys spinning division has not carried on substantial manufacturing operations during the year under review. The Company incurred a net loss during the financial year ended 31st March, 2026 and has accumulated losses. These conditions, along with prolonged non-operational status of manufacturing activities, indicate existence of material uncertainty that may cast significant doubt on the Companys ability to continue as a going concern.

However, the accompanying financial statements have been prepared by the management on a going concern basis considering the estimated realizable value of assets, expected revival measures, restructuring efforts and managements assessment regarding continuation of business.

Our opinion is not modified in respect of this matter.

Key Audit Matters:

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statements of the current period.

Key Audit Matter	How the matter was addressed in audit
Going Concern Assessment	We evaluated management assumptions relating to continuation of business, revival proposals, projected cash flow and disclosures relating to going concern uncertainty.
Deferred Tax Asset	We reviewed basis of recognition of deferred tax assets, projected taxable profits and management assumptions regarding future recoverability.
Possible Impairment of Plant and Machinery	We evaluated indicators of impairment considering prolonged non-operational status of spinning division and reviewed management explanations regarding carrying values of fixed assets.
Fixed Assets Verification and Ownership	We reviewed fixed asset records, examined title documents and evaluated disclosures relating to Property, Plant and Equipment.

Information other than the financial statements and auditors report thereon:

The Companys Board of Directors is responsible for preparation of the other information. The other information comprises included in Boards Report, Management Discussion and Analysis, Corporate Governance Report and related annexures but does not include standalone financial statements and our auditors report thereon.

Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the standalone financial statements, our responsibility is to read the other information and consider whether such other information is materially inconsistent with standalone financial statements or our knowledge obtained during audit.

We have nothing to report on in this regard.

Managements Responsibility for the Standalone Financial Statements

The Companys Board of Directors is responsible for the matters stated in section 134(5) of the Companies Act 2013 with respect to the preparation of standalone financial statements that give a true and fair view of the financial position, financial performance, including other comprehensive income, cash flows and changes in Equity of the Company in accordance with accounting principles generally accepted in India including Indian Accounting Standards specified under section 133 of the Act.

This responsibility includes maintenance of adequate accounting records of safeguarding assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls,

In preparing the standalone financial statements, management is responsible of assessing the Companys ability to continue as a going concern, and using going concern basis of accounting unless the Management either intends to liquidate the Company or to cease operations

The Board of Directors is also responsible for overseeing the Companys financial reporting process.

Auditors Responsibilities for the Audit of the Standalone Financial Statements

Our objectives are to obtain reasonable assurance about whether the standalone financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report containing our opinion.

As part of an audit in accordance with standards on auditing, we exercise professional judgment and maintain professional skepticism throughout the audit.

Our procedures included

• Identify and assess risks of material misstatement.

• Obtaining audit evidence

• Evaluating accounting policies and estimates

• Evaluating going concern assumptions

• Evaluating presentation and disclosures

• Assessing adequacy of internal financial controls

• Communicating significant audit matters with those charged with governance.

II. Report on Other Legal and Regulatory Requirements

1. As required by Companies (Auditors Report) Order, 2020 issued by Central Government of India in terms of section 143(11) of Act, we give in "Annexure A” a statement on matters specified in paragraphs 3 and 4 of the Order.

1. As required by Section 143(3) of the Act we report that-

a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary of the purposes of our audit.

b) In our opinion, proper books of account as required by law have been kept by the Company.

c) The Balance Sheet, the Statement of Profit and Loss including Other Comprehensive Income, Statement of Changes in Equity and Statement of Cash Flow statement are in agreement with books of accounts.

d) In our opinion, the aforesaid standalone financial statements comply with the Indian Accounting Standards specified under Section 133 of the Act.

e) On the basis of the written representations received from the directors as on 31st March 2026 none of the directors is disqualified as on 31st March 2026 from being appointed as a director under Section 164(2) of the Act.

f) With respect to the adequacy of the internal financial controls over financial reporting and operating effectiveness of such controls, refer to our separate report in Annexure B. Our report contains an Adverse Opinion due to the identification of material weaknesses in internal controls over financial reporting as of March 31,2026.

g) In our opinion and according to information and explanations given to us, managerial remuneration paid during the year is in accordance with provions of section 197 of the Act.

h) With respect to matters to be included in Auditors Report under Rule 11 of Companies (Audit and Auditors) Rules, 2014:

i) The Company has disclosed impact of pending litigations on its financial position.

ii) The Company has made provision, as required for foreseeable losses, wherever required.

iii) There were no amount required to be transferred to Investor Education and Protection Fund.

iv) Management representations regarding funds advanced or received through intermediaries and ultimate beneficiaries have been obtained and nothing has come to our notice causing us to believe that such representations contain material misstatement.

v. The Board of directors has not proposed a dividend during the year.

vi. Based on my examination, the Company has used accounting software with the feature of recording audit trail (edit log) facility, and such features have been operated throughout the year for all relevant transactions recorded in the software subject to system configurations and controls maintained by management.

Further, based on our audit procedures and representations received, we did not come across any instance of material tampering of audit trail features during the year.

ANNEXURE “A” TO THE INDEPENDENT AUDITORS REPORT

(Referred to in paragraph 1 under ‘Report on Other Legal and Regulatory Requirements section of my report} to the Members of Katare Spinning Mills Limited

i. Property, Plant and Equipment

(a) The Company has maintained proper records showing full particulars including quantitative details and situation of Property, Plant and Equipment.

(b) The management has physically verified Property, Plant and Equipment during the year under phased verification programme.

(c) Title deeds of immovable properties are held in the name of the Company.

(d) The Company has not revalued Property, Plant and Equipment during the year.

(e) No proceedings have been initiated or are pending against the Company for holding any benami property.

ii. Inventory

(a) Inventory has been physically verified by management at reasonable intervals.

(b) The Company has not been sanctioned working capital limits exceeding Rs.5 crores on basis of security of current assets.

iii. Investments and Loans

The Company has got granted loans, advances, guarantees or securities covered under clause 3(iii) of the Order.

iv. Sections 185 and 186

In our opinion, provisions of sections 185 and 186 of the Companies Act, 2013 have been complied with wherever applicable.

v. Deposits

The Company has got accepted deposits within meaning of sections 73 and 76 of Companies Act, 2013.

vi. Cost Records

We have broadly reviewed books of account maintained pursuant to rules prescribed under section 148(1) of the Act and are of opinion that prima facie prescribed records have been maintained.

vii. Statutory Dues

(a) The Company is generally regular in depositing undisputed statutory dues including GST, PF, ESI, Income Tax and other statutory dues.

(b) According to records and explanations given to us, there are no disputed statutory dues pending except those disclosed in notes of accounts.

viii. Unrecorded income

There were no transactions relating to previously unrecorded income surrendered or disclosed during tax assessments.

ix. Borrowings

(a) According to records and explanations given to us, the Company has not committed material default in repayment of borrowings except delays/irregularities, if any, disclosed in financial statements.

(b) The Company has not been declared willful defaulter

(c) Term loans were applied for purposes for which obtained.

(d) Short-term funds have not been utilized for long-term purposes.

x. Public Offer/Preferential Allotment

The Company has not raised money through public offer or preferential allotment during the year.

xi. Fraud Reporting

(a) No fraud by Company or on Company has been noticed or reported during the year.

(b) No report under section 143(12) in Form ADT-4 has been filed.

(c) No whistle blower complaints were received.

xii. Nidhi Company

The Company is not a Nidhi Company.

xiii. Related Party Transactions

Transactions with related parties are in compliance with sections 177 and 188 wherever applicable and have been disclosed as required under applicable accounting standards.

xiv. Internal Audit

The Company has internal audit system commensurate with size and nature of business and internal audit reports were considered during statutory audit.

xv. Non-Cash Transactions

The Company has not entered into non-cash transactions with directors or persons connected with directors.

xv. RBI Registration

The Company is not required to be registered under section 45-IA of Reserve Bank of India Act, 1934.

xvii. Cash Losses

The Company has incurred cash losses during the current financial year as well as immediately preceding financial year.

xviii. Resignation of Auditors

There has been no resignation of statutory auditors during the year.

xix. Material Uncertainty Regarding Meeting Liabilities

Based on financial ratios, ageing and expected realization of financial assets and payment schedule of financial liabilities, recurring losses, prolonged non-operational manufacturing activities and management plans for revival, material uncertainty exists regarding continuity of operations.

However, based on information and explanations presently made available to us and management representations obtained by us, nothing has come to our attention which causes us to believe that the Company would be incapable of meeting liabilities existing at balance sheet date as and when they fall due within a period of one year from balance sheet date.

This reporting is not an assurance as to future viability of the Company.

xx. Corporate Social Responsibility

Section 135 relating to Corporate Social Responsibility is not applicable.

xxi. Consolidated Financial Statements.

The Company is not required to prepare consolidated financial statements.

ANNEXURE “B” TO THE INDEPENDENT AUDITORS REPORT

(Referred to in paragraph 2(f) under “Report on Other Legal and Regulatory Requirements” section of my report) to the Members of Katare Spinning Mills Limited of even date)

REPORT ON INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO STANDALONE FINANCIAL STATEMENTS.

We have audited internal financial controls with reference to standalone financial statements of KATARE SPINNING MILLS LIMITED (“the Company”) as of 31st March 2026 in conjunction with our audit of standalone financial statements for the year ended on that date.

Managements Responsibility for Internal Financial Controls

The Companys management is responsible for establishing and maintaining internal financial controls based on criteria established by the Company considering essential components of internal control stated in Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by institute of Chartered Accountants of

India.

These responsibilities include design, implementation and maintenance of adequate internal financial controls for ensuring orderly and efficient conduct of business, safeguarding of assets, prevention and detection of frauds and errors, accuracy and completeness of accounting records and timely preparation of reliable financial information.

Auditors Responsibility

Our responsibility is to express opinion on Companys internal financial controls with reference to standalone financial statements based on our audit.

We conducted our audit in accordance with Guidance Note on Audit of Internal Financial Controls Over Financial Reporting and standards on Auditing prescribed under section 143(10) of Companies Act, 2013.

Our audit included obtaining understanding of internal financial controls, assessing risks of material weaknesses and testing and evaluating design and operating effectiveness of internal controls.

We believe that audit evidence obtained by us is sufficient and appropriate to provide basis for our opinion.

Meaning of internal Financial Controls with Reference to Standalone Financial Statements

A Companys internal financial control with reference to standalone financial statements is process designed to provide reasonable assurance regarding reliability of financial reporting and preparation of financial statements.

Such controls include:

1. Maintenance of proper accounting records;

2. Authorization and recording of transactions;

3. Prevention and detection of unauthorized use or disposition of assets

Inherent Limitations of internal Financial Controls

Because of inherent limitations of internal financial controls including possibility of collusion or management override, material misstatements due to error or fraud may occur and not be detected.

Further, projections of evaluation of internal financial controls to future periods are subject to risk that controls may become inadequate because of changes in conditions.

Basis for Adverse Opinion

According to the information and explanations given to us and as observed from the financial statements, the Companys spinning division has remained substantially non-operational for a prolonged period. The company has not established or operated effective internal financial controls in the following areas, which constitute material weaknesses as of March 31,2026:

1. Asset Impairment Assessment Process: The Company lacks an effective control operating workflow to evaluate and test long-term impairment indicators under Ind AS 36 (Impairment of Assets). Controls failed to identify and record necessary valuation adjustments for Property, Plant, and Equipment despite prolonged manufacturing suspension and continuous operating cash losses.

2. Long-Term Business Evaluation & Deferred Tax Balances: The financial reporting risk-assessment process did not operate effectively to reliably evaluate the carrying value of timing differences and deferred tax liability balances in correlation with long-term business survival metrics under Ind AS 12.

3. Operational Manufacturing Controls: Systemic and process-driven internal controls relating to the monitoring and routine handling of inventory and specialized production machinery have been non-functional in the normal course of business due to the sustained closure of the spinning facility.

A "material weakness" is a deficiency, or a combination of deficiencies, in internal financial control over financial reporting, such that there is a reasonable possibility that a material misstatement of the companys annual financial statements will not be prevented or detected on a timely basis.

Adverse Opinion

In our opinion, because of the effects of the material weaknesses described above in the Basis for Adverse Opinion paragraph, on the achievement of the objectives of the control criteria, the Company has not maintained adequate and effective internal financial controls with reference to standalone financial statements as at March 31, 2026, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.

We have considered the material weaknesses identified and reported above in determining the nature, timing, and extent of audit tests applied in our audit of the standalone financial statements of the Company for the year ended March 31, 2026, and these material weaknesses fully support the modifications described in our Basis for Qualified Opinion paragraph on the standalone financial statements.

	For G M PAWLE AND ASSOCIATES
	Chartered Accountants
	FRN- 160253W
	Sd/-
Place: Solapur	Ganesh Mallikarjun Pawle
Date: 30th May 2026	Proprietor
	(Membership No.: 032561)
	UDIN: 26032561RACKEQ1249