Asian Hotels West Q2 FY27 Results with Adverse Audit

Income Statement for Q2 FY27 (Quarter Ended September 30, 2026):

Total Income: ₹217.77 lakhs (comprising entirely of Other Income; Revenue from Operations was ₹0)
Total Expenses: ₹204.07 lakhs
Loss before exceptional items and tax: ₹13.71 lakhs
Exceptional Items: ₹1,063.19 lakhs (relating to a property tax provision)
Loss before tax: ₹(1,049.49) lakhs
Tax Expense: ₹(16.93) lakhs (deferred tax credit)
Net Loss for the quarter: ₹(1,032.56) lakhs
Basic & Diluted EPS: ₹(8.86)

Income Statement for H1 FY27 (Half Year Ended September 30, 2026):

Balance Sheet (Standalone) as of September 30, 2026:

Total Assets: ₹55,048.26 lakhs
Property, Plant and Equipment: ₹19,066.67 lakhs
Right-of-use assets: ₹2,342.53 lakhs
Investments: ₹32,745.80 lakhs
Cash and Cash Equivalents: ₹73.85 lakhs
Total Equity: ₹8,995.48 lakhs
Borrowings: ₹39,650.00 lakhs (₹39,000.00 lakhs current; ₹650.00 lakhs non-current)
Current Liabilities: ₹43,694.62 lakhs
Current Liabilities exceed Current Assets by ₹43,259.10 lakhs

Income Statement for Q2 FY27 (Quarter Ended September 30, 2026):

Balance Sheet (Consolidated) as of September 30, 2026:

Total Assets: ₹89,965.84 lakhs
Total Equity: ₹1,483.31 lakhs
Borrowings: ₹49,570.45 lakhs
Current Liabilities exceed Current Assets by ₹44,410.31 lakhs for the Holding Company

1. Borrowing Classification and Competing Buy Options:

Novak Hotels Private Limited (Saraf Group) advanced ₹39,000 lakhs to the company, which is currently classified as borrowings.
The amount was received under a Framework Agreement between the company's promoters and Saraf Group as part of the company's insolvency resolution process. The company is not a party to this agreement.
The auditors note that Novak's financial statements classify this amount as "advances for acquiring Hyatt Regency, Mumbai."
During the quarter, both Robust Hotels Limited and Novak Hotels Private Limited sent letters exercising buy options under the Framework Agreement, each claiming the right to acquire Hyatt Regency, Mumbai.
The company has obtained a legal opinion to determine the contractual rights of the parties and will decide its course of action based on this opinion, subject to applicable approvals.
Due to this uncertainty, the auditors are unable to determine if the ₹39,000 lakhs should be classified as borrowings or an advance against the sale of an asset.

2. Unrecognized Interest and Expenses:

The company has not recognized an interest expense of ₹9,552.60 lakhs and reimbursement expenses of ₹1,939.65 lakhs claimed by the lender.
There is an unreconciled balance of ₹242.64 lakhs in the recorded borrowing amount.
The auditors state that if the amounts are borrowings, even the minimum interest rate mandated by Section 186(7) of the Companies Act, 2013 would result in a material interest expense not recognized in the financials.

3. Property Tax Demand (Exceptional Item):

The company received a demand-cum-recovery notice from the Brihanmumbai Municipal Corporation (BMC) for ₹1,436.71 lakhs. This is for property tax covering the period from April 1, 2010, to March 31, 2027, due to a retrospective change in the assessment method (Rateable Value System to Capital Value System) per Maharashtra Act No. 21 of 2026.
The company has provided for this demand, recognizing an expense of ₹1,063.19 lakhs for the half year ended September 30, 2026 (after considering ₹129.52 lakhs provided up to March 31, 2026). This has been classified as an exceptional item.

4. Going Concern Uncertainty:

The company's current liabilities exceed its current assets by ₹43,259.10 lakhs (standalone) and ₹44,410.31 lakhs (consolidated for the holding company) as of September 30, 2026.
The auditors conclude that a material uncertainty exists that may cast significant doubt on the company's ability to continue as a going concern. The financial statements have been prepared on a going concern basis considering the approved settlement under Section 12A of IBC 2016 and steps to meet regulatory obligations.

5. Other Audit Qualifications:

The company did not provide proper records for physical verification of Property, Plant and Equipment (₹1,442.36 lakhs).
Outstanding recoverable/payable balances with government authorities are subject to reconciliation and potential adjustment.
The company has not filed the necessary forms with the Ministry of Corporate Affairs for the creation of charge/security on Hyatt Regency Mumbai, approved by shareholders.
The applicability of Section 180(1)(a) of the Companies Act, 2013 (sale of undertaking requiring member approval) concerning the potential sale of Hyatt Regency needs evaluation based on the legal opinion's outcome.