True Colors Limited’s Q3FY26 Monitoring Report Reveals Compliance Issue
True Colors Limited’s quarterly monitoring report for the period ended December 31, 2025, has revealed a regulatory compliance issue concerning the placement of IPO proceeds. The textile company, which raised Rs 108.86 crore through its Initial Public Offer in September 2025, faced scrutiny from its monitoring agency Crisil Ratings Limited over the interim deployment of funds.
The monitoring agency flagged that True Colors Limited had parked Rs 20 crore of unutilized IPO proceeds in a fixed deposit with Prime Co-Operative Bank Ltd, which is not included in the Second Schedule of the Reserve Bank of India Act, 1934. This placement violated the interim use of proceeds guidelines as specified in the company’s offer document and SEBI ICDR regulations.
Utilization of IPO Proceeds
Out of the net proceeds of Rs 100.70 crore, True Colors Limited has utilized Rs 73.70 crore during the quarter across its stated objectives. The utilization breakdown shows significant progress in debt repayment and working capital funding.
The company completely utilized the allocated funds for debt repayment and prepayment of borrowings, while partial utilization occurred in working capital funding and general corporate purposes.
As of December 31, 2025, the total unutilized amount of Rs 27.00 crore was deployed across three fixed deposits with varying interest rates and maturity periods.
Rectification of Compliance Issue
The Board of Directors clarified that the Rs 20 crore placement was made purely on commercial considerations due to the comparatively higher interest rate offered by the cooperative bank. The company emphasized that the funds remained fully traceable and under company control, with no diversion or utilization for purposes other than stated objectives.
The company stated the placement was made in good faith without malafide intent, under unawareness of the specific regulatory restriction. Upon being informed of the compliance requirement, True Colors Limited immediately withdrew the entire amount, and as of February 13, 2026, the Rs 20 crore was credited back to the designated monitoring account.
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Monitoring Agency’s Report
Crisil Ratings Limited, serving as the monitoring agency under SEBI ICDR Regulations, confirmed that proceeds towards the objects of the offer were utilized as per disclosures in the prospectus dated September 26, 2025. However, the agency specifically noted the deviation regarding the cooperative bank placement.
The monitoring report indicated no other major deviations from earlier reports and confirmed that utilization aligned with the offer document requirements, except for the interim placement issue. The company has strengthened internal compliance controls to ensure strict adherence to applicable SEBI and monitoring framework requirements going forward.
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Conclusion
In conclusion, True Colors Limited’s Q3FY26 monitoring report revealed a compliance issue regarding the placement of IPO proceeds. The company has rectified the issue and strengthened its internal compliance controls to ensure adherence to SEBI guidelines and regulations.
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