Padam Cotton lent ₹2.48 cr of rights-issue money to two undisclosed firms
Its monitoring agency says ₹2.85 cr, or 15.23% of the raise, went to loans not in the prospectus. That's 12.95% of the company's market cap.
— 2 earlier stories on Padam Cotton Yarns Ltd. →What's new
- Monitoring agency flagged a 15.23% deviation in how Padam Cotton used its ₹18.71 cr rights-issue money.
- ₹2.48 cr was lent as interest-bearing advances to Ved Shastra Astro and DSP Technical and Financial Services.
- Neither entity was mentioned in the offer document; the agency couldn't verify the stated purpose of a ₹0.37 cr reimbursement.
Why this matters
A monitoring agency exists to confirm that money raised from public investors is spent as promised. When it flags a 15% deviation for loans to undisclosed parties in a company worth just ₹22 cr, that's a material governance breach. The company claims the loans are compliant, but the agency's inability to verify the payments undermines that defence.
What we're watching
- Whether SEBI initiates a probe into the undisclosed advances.
- If Padam Cotton provides documentation the monitoring agency says it couldn't verify.
- The impact on the stock and any potential investor litigation.
The full read
Padam Cotton raised ₹18.71 crore from public investors in a rights issue. Its monitoring agency now says 15.23% of that money, or ₹2.48 crore, was lent as interest-bearing advances to two companies that weren't in the prospectus: Ved Shastra Astro and DSP Technical and Financial Services. A further ₹0.37 crore was reimbursed to Ved Shastra Astro for issue-related expenses, a purpose the agency couldn't verify. The total deviation of ₹2.85 crore is 12.95% of Padam Cotton's ₹22 crore market cap. For a nano-cap, that's not a rounding error. It's a quarter of the public float's worth of cash moved to undisclosed counterparties. The company says the loans are compliant and commercially sound. The agency's report says it can't confirm that.
Questions answered
- How much of the rights-issue money was diverted, and where did it go?
- ₹2.48 crore, or 15.23% of the ₹18.71 crore raised, was advanced as interest-bearing loans to Ved Shastra Astro and DSP Technical and Financial Services. Neither entity was mentioned in the offer document.
- What else did the monitoring agency flag?
- The agency also noted a ₹0.37 crore reimbursement to Ved Shastra Astro for issue-related expenses, but it could not verify that the payments were actually for that purpose.
- How significant is this deviation relative to the company's size?
- The ₹2.85 crore total deviation represents 12.95% of Padam Cotton's ₹22 crore market capitalization. For a nano-cap company, that's a substantial portion of its public value.
- What is the company's response?
- Padam Cotton defended the loans as commercially beneficial and compliant with statutory approvals. The monitoring agency, however, could not independently verify the purpose of the advances.
Story so far
All notes on PADAMCO →- 9 Jun 2026 · 4:28 PM IST Padam Cotton lent ₹2.48 cr of rights-issue money to two undisclosed firms
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