Rajapalayam mills Limited has provided a corporate guarantee of Rs.40 crores to Kotak Mahindra Investments Limited on behalf of group company Sandhya Spinning Mill Limited. The guarantee was submitted on 25-03-2026 following board approval obtained on 11-08-2025, as disclosed under SEBI Listing Obligations and Disclosure Requirements Regulations, 2015.

Corporate Guarantee Details

The corporate guarantee has been structured as a three-party agreement involving Sandhya Spinning Mill Limited as the borrower, Rajapalayam Mills Limited as the guarantor, and Kotak Mahindra Investments Limited as the lender. The primary purpose of this guarantee is to support the loan facility sanctioned by Kotak Mahindra Investments Limited to Sandhya Spinning Mill Limited.

Related Party Transaction Structure

This transaction qualifies as a related party transaction due to the existing relationship between the companies. Sandhya Spinning Mill Limited is a member of the promoter group of Rajapalayam Mills Limited and holds 0.01% equity shares in the company. Additionally, key promoters including P.R. Venketrama Raja, R. Sudarsanam, P.V. Nirmala Raju, B. Sri Sandhya Raju, and P.V. Abinav Ramasubramaniam Raja collectively hold 97.514% equity shareholding in Sandhya Spinning Mill Limited.

Terms and Conditions

Under the guarantee agreement, if Sandhya Spinning Mill Limited defaults on loan repayment along with interest on the due date, Rajapalayam Mills Limited will be liable to pay the outstanding amount to Kotak Mahindra Investments Limited. The lender does not have rights to appoint directors, first right to share subscription, or rights to restrict capital structure changes.

Strategic Rationale

The corporate guarantee is designed to strengthen Sandhya Spinning Mill Limited's creditworthiness, enabling the company to secure financing at competitive interest rates and favorable terms and conditions. Rajapalayam Mills Limited has not received any commission, brokerage, fees, or other consideration for providing this guarantee, maintaining the arm's length nature of the transaction consistent with other group company guarantees.

The company has confirmed that this guarantee aligns with its existing practice of providing corporate guarantees to other group companies, ensuring consistency in its financial support framework for related entities.

Rajapalayam Mills Limited has received a substantial GST demand order worth Rs. 31.57 crores from the Tamil Nadu State Tax authorities for the financial year 2023-24. The company disclosed this development to BSE Limited on 18-03-2026 under Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

GST Demand Order Details

The demand order was issued by Mr. Lakshmanan Kumaresan, Commercial Tax Officer serving as State Tax Officer (Inspection – 4) under the Intelligence Wing of the Joint Commissioner (ST) office. The order falls under Section 74 of the TNGST/CGST Act, 2017.

Nature of Alleged Violations

The GST demand order encompasses multiple categories of alleged tax violations. The State Tax Officer has identified several areas where the company allegedly failed to comply with GST regulations during FY 2023-24.

The specific violations mentioned in the demand order include:

• Tax due on belated payment to creditors
• Tax due on corporate guarantee
• Tax due for addition/deletion to fixed assets
• Tax due on rent paid
• Tax due on other selling expenses

Company's Response and Position

Rajapalayam Mills Limited has indicated its intention to challenge the demand order through the appellate process. The company's management has conducted a preliminary assessment of the case and expressed confidence in their position.

According to the company's disclosure, they believe they have a strong case on merits and are confident of achieving a favorable outcome at the appellate stage. This suggests the company disputes the allegations made by the tax authorities and plans to contest the demand through proper legal channels.

Regulatory Compliance

The disclosure was made in compliance with SEBI regulations, specifically under Regulation 30 read with Para A of Part A of Schedule III of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The company also referenced SEBI Master Circular no. HO/49/14/14(7)2025-CFD-POD2/I/3762/2026 dated 30th January, 2026, demonstrating adherence to updated regulatory guidelines.

The Rs. 31.57 crores demand represents a significant financial exposure for the company, though the ultimate impact will depend on the outcome of the appellate proceedings that the company intends to pursue.