Hela shares transferred to Watch List following auditor disclaimer

Hela Apparel Holdings PLC has seen its shares transferred to the Watch List of the Colombo Stock Exchange (CSE) effective December 12, 2025, after its independent auditors issued a disclaimer of opinion on the company’s financial statements for the year ended March 31, 2025. 

The disclaimer indicates that the auditors were unable to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion, typically due to multiple material uncertainties. In this instance, the concerns are largely driven by the group’s challenging financial position and going concern status.

The transfer to the Watch List triggers a strict regulatory timeline for the company to regularize its status. Hela has announced a target date of June 11, 2026, to resolve the matters giving rise to the disclaimer.

Under CSE listing rules, if the company fails to rectify these issues within six months of the transfer, trading in its shares will be suspended. A continued suspension for a period of twelve months would result in the automatic delisting of the company’s shares.

The auditor’s disclaimer is the culmination of a period of severe financial stress for the apparel manufacturer. The group reported a massive consolidated loss of Rs. 22.9 billion for the 2024/25 financial year, which severely eroded its capital base. In June 2025, the company formally disclosed that three of its key subsidiaries - Alpha Textiles, FDN Sourcing, and Foundation Garments were facing a “serious loss of capital,” with their net assets falling below stated capital.

Compounding these challenges were delays in financial reporting. On November 28, 2025, the CSE warned that Hela’s shares would be suspended if the overdue Annual Report for the year ended March 31, 2025, was not submitted by early December. Although the report was eventually published on December 5, 2025, the accompanying disclaimer of opinion necessitated the immediate transfer to the Watch List.
To navigate this crisis, the Board has outlined a two-pronged recovery strategy focused on debt restructuring and capital infusion.

The company recently secured in-principle approval from its banking partners to restructure its debt, a plan that includes concessionary interest rates and deferred repayments to ease liquidity pressure. However, this agreement is contingent upon a successful capital raise.

The company is currently in advanced negotiations with strategic investors to secure an equity injection of between Rs. 3 billion and Rs. 4.4 billion. Additionally, existing major shareholders have committed to investing a minimum of Rs. 682 million. 

Hela’s management expresses confidence that finalising these initiatives will sufficiently strengthen the group’s balance sheet to remove the auditor’s disclaimer and restore the company’s listing status before the regulatory deadline. (NF)