Digjam Limited reported a net profit of ₹82.43 lakhs for the quarter ended June 30, 2026 (Q1FY26), marking a sharp recovery from the ₹72.78 lakh loss posted in the immediately preceding quarter. Revenue from operations surged 89% year-on-year to ₹745.79 lakhs, reflecting improved performance in its continuing operations. Despite this operational improvement, the company’s statutory auditor highlighted a material uncertainty regarding its ability to continue as a going concern, citing a working capital deficit and the discontinuation of its sole manufacturing facility.

The Board of Directors approved the unaudited financial results on August 06, 2026, pursuant to Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The results were reviewed by Nayan Parikh & Co., the company’s independent auditor, under Standard on Review Engagements (SRE) 2410. The trading window for designated persons remained closed from July 01, 2026, until 48 hours after the declaration of results, in compliance with SEBI’s insider trading regulations.

Financial Performance

Continuing operations contributed ₹87.43 lakhs to the bottom line in Q1FY26, compared to a loss of ₹65.77 lakhs in the same period last year. Other income rose significantly to ₹13.71 lakhs from ₹0.91 lakhs in Q1FY25. However, discontinued operations resulted in a loss of ₹5.00 lakhs, dragging down the consolidated net profit.

Earnings per share for continuing and discontinued operations combined stood at ₹0.41, up from a loss of ₹0.36 per share in Q4FY25 and a profit of ₹0.48 in Q1FY25. The company incurred no finance costs in the current quarter, down from ₹70.25 lakhs in Q1FY25, aiding the margin expansion.

Going Concern and Restructuring

Nayan Parikh & Co. drew attention to Note 4 of the financial statements, which discloses that current liabilities exceeded current assets by ₹2,107.75 lakhs as of June 30, 2026. Furthermore, operations at the company’s sole manufacturing facility in Jamnagar were discontinued effective March 31, 2025. The related assets, with a carrying value of ₹5,318.53 lakhs, have been classified as "Non-current assets held for sale" under Ind AS 105.

Management maintains that the financial results are prepared on a going concern basis, relying on plans to realize non-core assets, optimize costs, and execute a proposed scheme of arrangement. This scheme involves the demerger of the textile undertaking of Reid and Taylor International Private Limited into Digjam, with an appointed date of July 1, 2025. The scheme is pending requisite regulatory approvals and has not yet been reflected in these financial results.

What the Numbers Show

The divergence between the strong profitability in continuing operations and the severe balance sheet strain highlights the transitional nature of Digjam’s current business model. While the core business generated a healthy pre-tax profit of ₹87.43 lakhs without finance costs, the liquidity position remains precarious with a working capital deficit exceeding ₹2,100 lakhs. The classification of ₹5,318.53 lakhs in assets as held for sale suggests that management is prioritizing asset monetization over operational expansion in the near term. The success of the proposed scheme of arrangement with Reid and Taylor International will be critical in resolving the going concern doubts raised by the auditor.

Digjam Limited has scheduled an Extra-Ordinary General Meeting (EGM) on August 16, 2026, to seek shareholder approval for a Scheme of Arrangement with Reid & Taylor International Private Limited. The scheme proposes a share exchange ratio of 46,481 equity shares of Digjam for every 100 equity shares of Reid & Taylor International Private Limited. The meeting is convened pursuant to an order dated June 19, 2026, from the Hon’ble National Company Law Tribunal (NCLT), Chennai Bench.

The Scheme of Arrangement aims to consolidate the textile business of Reid & Taylor International Private Limited into Digjam Limited. The appointed date for the scheme is July 1, 2025. The consideration for the demerger involves the issuance of fully paid-up equity shares of Digjam, having a face value of INR 10 each, to the shareholders of the demerged company. The shares issued pursuant to the scheme are proposed to be listed on BSE Limited and National Stock Exchange of India Limited.

The Board of Directors of Digjam Limited and Reid & Taylor International Private Limited approved the scheme on June 29, 2025. The share entitlement ratio was recommended by Mr. Archit Gupta, a Registered Valuer, based on a valuation report dated June 27, 2025. A Fairness Opinion Report was also obtained from Navigant Corporate Advisors Limited on June 29, 2025. The statutory auditors of both companies have confirmed that the accounting treatment provided in the scheme is in compliance with the Companies Act, 2013.

The EGM will be held through Video Conferencing (VC) or Other Audio-Visual Means (OAVM) at 11:00 AM IST. Mr. V. Sriram Ananth has been appointed as the Chairperson for the meeting, and Mr. Ajith Kumar. P, Advocate, will serve as the Scrutinizer. The record date for determining eligibility for e-voting is August 10, 2026. The facility for remote e-voting will be available from August 13, 2026, at 9:00 AM IST to August 15, 2026, at 5:00 PM IST.

Shareholding Pattern

The implementation of the scheme will alter the shareholding pattern of Digjam Limited. The promoter and promoter group shareholding is expected to decrease marginally from 75.00% to 74.97%. The public shareholding will increase from 25.00% to 25.03%, which includes the classification of Qualified Institutional Buyers (QIBs) of Reid & Taylor International Private Limited as public shareholders in Digjam Limited. The pre-scheme public shareholders of Digjam will see their holding decrease from 25% to 5.48%.

Capital Structure

Pursuant to the scheme, Digjam Limited will issue shares to the shareholders of Reid & Taylor International Private Limited. The post-scheme issued, subscribed, and paid-up equity share capital of Digjam Limited will be 9,13,01,854 equity shares of INR 10 each, amounting to INR 91,30,18,540. The total issued, subscribed, and paid-up capital, including preference shares, will be INR 1,18,30,18,540.

The scheme is subject to the approval of the Hon’ble NCLT and other regulatory authorities. The resolution requires approval by a majority in number representing three-fourths in value of the equity shareholders present and voting. Additionally, the votes cast by public shareholders in favour of the scheme must be more than those cast against it.