Axel Polymers received a show cause notice from the Securities and Exchange Board of India (SEBI) on September 11, 2026, regarding alleged wrongful availment of input tax credit under the Goods and Services Tax regime.

The regulator initiated adjudication proceedings under Section 151 of the SEBI Act, 1995, against the company, its non-independent directors, and other persons. The notice, bearing number SCN No. SEBI/EAD3/MS/SM/DIS/23926/2026, was issued under Rule 4(1) of the SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995.

Allegations and Financial Exposure

The Office of the Commissioner, Central GST & Central Excise, Vadodara-II, alleged that the company wrongfully availed input tax credit without physical receipt of inward supplies during financial years 2021-22 to 2024-25. The authority further claimed the company passed on such credits without actual supply of goods.

Consequently, a recovery of ₹31.57 crore, along with applicable interest and penalties, has been proposed against the entity. This figure represents the core financial exposure cited in the regulatory action.

What the Numbers Show

The proposed recovery amount of ₹31.57 crore relates specifically to the alleged wrongful availment of input tax credit. It does not include the additional interest and penalties that are also proposed by the tax authority. The total monetary impact on the company’s balance sheet will depend on the final outcome of these adjudication proceedings.

Operational Impact

The company stated in its exchange filing that the notice has no impact on its routine operations. However, it noted that the exact financial implications cannot be ascertained at present and will depend on the adjudication results.

This development follows previous intimations dated July 4, 2024, July 24, 2024, and February 4, 2026, concerning the same GST matter. The company has committed to keeping the stock exchanges informed of further developments.

Axel Polymers has fixed September 4, 2026, as the cut-off date for determining shareholder eligibility for its 34th Annual General Meeting (AGM). The company submitted this intimation to the Bombay Stock Exchange on August 29, 2026. This confirms the timeline previously disclosed in its revised annual report filing.

The Register of Members and Share Transfer Books will remain closed from September 5 to September 11, 2026, inclusive. The AGM is scheduled for September 11, 2026, at 11:30 am via Video Conference or Other Audio-Visual Means (VC/OAVM). Remote e-voting will be open from September 8 to September 10, 2026.

Key Agenda Items

Shareholders will vote on several critical governance resolutions, including the reappointment of the Managing Director and the addition of a new Independent Director. These appointments occur against the backdrop of significant financial challenges reported for FY26.

• Reappointment of Managing Director: Approval for the reappointment of Gaurav Thanky as Managing Director for a five-year term commencing from October 1, 2026, to September 30, 2031. This is an ordinary resolution.
• Remuneration Approval: A special resolution to approve Mr. Thanky's remuneration package for three years (October 1, 2026, to September 30, 2029). The proposed salary is ₹850,000 per month, along with perquisites and allowances as per company policy. As a promoter group member, his remuneration requires shareholder approval under SEBI LODR regulations.
• Appointment of Independent Director: A special resolution to appoint Yogesh Keshariya as a Non-Executive Independent Director for a three-year term starting June 12, 2026. Mr. Keshariya, a Chartered Accountant and partner at CNK, Vadodara, brings expertise in indirect taxes and internal audits.
• Continuation of Non-Executive Director: An ordinary resolution to continue Aarasp Bejan Bodhanwala as a Non-Executive Non-Independent Director from October 1, 2026.
• Remuneration for Non-Executive Director: A special resolution to approve annual remuneration of ₹12.0 million for Mr. Bodhanwala for three years (October 1, 2026, to September 30, 2029).

Financial Context

Axel Polymers reported a net loss of ₹112.6 million for FY26, a sharp reversal from the net profit of ₹17.4 million recorded in FY25. The decline in profitability was driven by a 43% drop in revenue from operations, which fell to ₹444.0 million from ₹780.9 million in the previous year.

The company attributed the performance contraction to subdued demand in certain customer segments, competitive pricing pressures, and fluctuations in raw material costs. Despite operational headwinds, the company raised ₹111.8 million through a preferential allotment of equity shares during the year, boosting its paid-up capital to ₹110.0 million.

Financial Performance

The company's total income stood at ₹445.1 million in FY26, down from ₹782.2 million in FY25. Operating expenses remained relatively sticky despite the revenue decline, with cost of materials consumed dropping proportionally to ₹332.9 million from ₹827.3 million. However, employee benefit expenses and finance costs saw marginal increases or remained elevated, contributing to the widening loss before tax, which reached ₹125.5 million against a profit before tax of ₹31.1 million in the prior year.

Regulatory Scrutiny and Going Concern

A significant development for shareholders is the disclosure of a material uncertainty related to the company's going concern status. The statutory auditors highlighted a show-cause notice received from the GST Commissioner, Central Vadodara, alleging wrongful availment of input tax credit amounting to ₹315.7 million along with applicable interest and penalties for FY21 to FY25.

The Board of Directors has stated that it has a strong case on merits and is contesting the notice through appropriate legal channels. Additionally, investigations have been initiated by SEBI and the Income Tax Department consequent to the GST proceedings. Legal proceedings under Section 138 of the Negotiable Instruments Act are also pending regarding nine post-dated cheques aggregating to ₹180.0 million, which the company maintains were issued as security and not towards discharge of debt.

Corporate Governance Implications

With its paid-up equity share capital crossing the ₹100 million threshold due to the preferential issue, Axel Polymers will now be subject to stricter corporate governance provisions under SEBI LODR regulations starting FY27. The company voluntarily prepared a corporate governance report for FY26 to maintain transparency. The upcoming AGM resolutions reflect this heightened focus on governance structure, particularly with the induction of an independent director with specialized tax expertise amid ongoing regulatory investigations.