Mihika Industries Faces Scrutiny Over Qualified Audit Opinion and Rights Issue

Mihika Industries has announced a proposed rights issue of up to ₹90 crore and a related party transaction limit of up to ₹50 crore. This comes as the company's statutory auditor issued a qualified opinion on its financial statements for FY26.

Reader Takeaway: Rights issue plans face audit concerns; drastic revenue drop noted.

What just happened

Mihika Industries has proposed a rights issue to raise up to ₹90 crore. The Board has also approved seeking shareholder approval for material related party transactions with M/s. Veggie Fest Foods Private Limited, a promoter entity, up to ₹50 crore for FY 2026-27. Additionally, the company plans to shift its registered office from West Bengal to Gujarat.

Why this matters

The company's financial performance shows a stark 92.29% decline in Revenue from Operations for FY26, dropping to ₹2.68 crore from ₹34.74 crore in FY25. Despite this, Net Profit saw a marginal increase of 57.88% to ₹8.62 lakh, with Basic EPS rising to ₹0.09. However, these results are overshadowed by a qualified audit opinion, which points to significant issues including documentation gaps for trade receivables and payables, lack of inventory valuation support, failure to appoint an internal auditor for FY26, and inadequate IT and internal financial controls.

The backstory

For FY26, Mihika Industries reported Revenue from Operations of ₹2.68 crore and Net Profit of ₹0.09 crore. This is a significant drop from FY25 when Revenue from Operations stood at ₹34.74 crore and Net Profit was ₹0.05 crore.

What changes now

The company is seeking shareholder approval for the rights issue and related party transactions. The shift of the registered office to Gujarat is also pending shareholder approval. Investors will be looking for concrete steps to address the auditor's concerns and SEBI regulatory non-compliances.

Risks to watch

Key risks include the severe decline in revenue, the implications of the qualified audit opinion which signals potential weaknesses in financial reporting and internal controls, and the large related party transaction which represents over 1,800% of the company's FY26 turnover. Multiple instances of non-compliance with SEBI LODR regulations also pose a significant risk to governance.

Peer comparison

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Context metrics (time-bound)

In FY 2025-26, Mihika Industries reported Revenue from Operations of ₹2.6764 crore and Net Profit of ₹0.0862 crore. This compares to FY 2024-25 figures of ₹34.7383 crore for Revenue from Operations and ₹0.0546 crore for Net Profit.

What to track next

Investors should closely monitor the company's progress in addressing the audit qualifications, its ability to secure shareholder approval for the rights issue and related party transactions, and its compliance with SEBI regulations. The effectiveness of the internal audit function and financial controls will be critical.