Talwalkars Auditor Disclaims Review of Reconstructed Q3 FY24 Results

Key Quantitative Figures

• Depreciation and Amortization Expenses: ₹827.00 lakh (Q3 FY24), ₹833.90 lakh (Q2 FY24), ₹816.05 lakh (Q3 FY23)
• Total Expenses: ₹827.00 lakh (Q3 FY24), ₹833.90 lakh (Q2 FY24), ₹816.05 lakh (Q3 FY23)
• Loss before tax: ₹(827.00) lakh (Q3 FY24), ₹(833.90) lakh (Q2 FY24), ₹(816.05) lakh (Q3 FY23)
• Net Loss for period: ₹(827.00) lakh (Q3 FY24), ₹(833.90) lakh (Q2 FY24), ₹(816.05) lakh (Q3 FY23)
• Basic and Diluted Loss per share: ₹(2.667) (Q3 FY24), ₹(2.690) (Q2 FY24), ₹(2.632) (Q3 FY23)
• Paid-up Equity Share Capital: ₹3,100.49 lakh with face value of ₹10.00 per share

Dates of Action

• Corporate Insolvency Resolution Process (CIRP) initiated: January 11, 2021
• Liquidation Order date: April 28, 2022
• Transfer Date (control transferred to Successful Bidder): November 7, 2024
• Sale Certificate issued: January 23, 2025
• NCLT Relief Order: February 26, 2026
• Auditor's report date: May 30, 2026

Parties Involved

• Resolution Professional: Mr. Saurabh Kumar Tikmani
• Liquidator: Mr. Gajesh Labhchand Jain
• Auditor: K Bhavsar & Co. (Firm Registration No.: 145880W), Proprietor Shivam Bhavsar (Mem. No. 180566)
• Successful Bidder: Not named in document
• Applicant in CIRP: Axis Bank Limited

Basis for Disclaimer of Conclusion

The auditor disclaims any conclusion on the financial results due to pervasive scope limitations:

• Company underwent CIRP and subsequent liquidation proceedings during historical periods
• Current management acquired company on November 7, 2024, but had no access to complete books of accounts, original vouchers, or underlying IT servers
• Financial results reconstructed on "best-effort basis" using fragmented data and summary statements from Liquidator
• Unable to conduct physical verification of fixed assets and inventories
• Unable to ascertain potential impairment under Ind AS 36
• Unable to verify historical balances of trade receivables, cash and bank balances, loans and advances, trade payables, borrowings, and statutory dues
• Unable to evaluate financial impact of shifting accounting bases during CIRP vs liquidation phases
• Unable to ascertain completeness of provisions for taxation (Ind AS 12), employee benefits (Ind AS 19), contingent liabilities, and related party transactions
• Internal Financial Controls and SEBI LODR compliances were not operational during transition period

Emphasis of Matter

Auditor draws attention to:

• NCLT Order dated February 26, 2026, which permanently extinguished all pre-transfer dues and liabilities
• Existing equity share capital stands cancelled pursuant to the Order
• Company has adopted Fresh Start Accounting effective from Transfer Date of November 7, 2024

Corporate Background and Insolvency Proceedings

• Company incorporated as public limited company with shares listed on BSE and NSE
• Scheme of Demerger approved by NCLT on December 21, 2017, demerging gymnasium business into Talwalkars Healthclubs Limited
• CIRP initiated on January 11, 2021, by NCLT Mumbai Bench on application by Axis Bank Limited
• No Resolution Plan received by final submission date (November 15, 2021)
• Liquidation proceedings initiated with Order dated April 28, 2022
• Company sold as going concern via e-auction on August 16, 2024
• Sale consideration fully paid on "as is where is" and "no recourse" basis
• Payment to stakeholders under Section 53(1) of IBC completed on November 28, 2024

NCLT Relief Order Impact

• NCLT Relief Order dated February 26, 2026 provides legal basis for regularization of past non-compliances
• Successful Bidder not liable for statutory/regulatory non-compliances occurring prior to Transfer Date (November 7, 2024)
• Waives penalties/fines levied by BSE and NSE for non-publication of results
• All pre-transfer liabilities permanently extinguished
• Existing equity share capital cancelled without payment

Accounting Policies by Period

• Pre-CIRP Period (Sep-2019 to Dec-2020): Prepared under Ind AS on going concern basis
• CIRP Period (Jan-2021 to Apr-2022): Assets stated at net realizable values, CIRP costs expensed as incurred
• Liquidation Period (May-2022 to Nov-2024): Prepared on liquidation basis, write-back of liabilities treated as Capital Reserve
• Post-Going-Concern-Sale Period (Dec-2024): Fresh Start Accounting adopted from Transfer Date (November 7, 2024)

Going Concern Assessment

Company was not on going concern basis during CIRP and liquidation periods (Jan-2021 to Nov-2024). Post Transfer Date, going concern assumption is appropriate due to clear title, extinguishment of liabilities, and legal protections from NCLT Relief Order.

Financial Impact

Financial impact of the historical operations cannot be reliably determined due to non-availability of original records and reconstruction on best-effort basis. All pre-transfer liabilities have been extinguished pursuant to NCLT Order.