Aarnav Fashions operating cash flow turns negative in H1

AARNAV FASHIONS LIMITED reported net cash used in operating activities of Rs 6.54 crore for the six months ended September 30, 2026, after inventory and trade receivables increased by a combined Rs 63.92 crore. The cash outflow came despite Rs 13.86 crore of operating profit before working-capital changes and Rs 3.33 crore of reported net profit.

Why did Aarnav Fashions report negative operating cash flow?

Aarnav Fashions reported negative operating cash flow because the net effect of working-capital movements exceeded cash generated before those changes. Profit before tax was Rs 4.43 crore for the six months ended September 30, 2026, and the company added back Rs 4.54 crore of depreciation and Rs 4.88 crore of finance expenses, producing Rs 13.86 crore of operating profit before working-capital changes.

The listed working-capital adjustments resulted in Rs 18.95 crore of cash use, leaving Rs 5.09 crore of cash used in operations before tax. A Rs 38.91 crore inventory increase and a Rs 25.01 crore rise in trade receivables were the two largest outflows. After Rs 1.45 crore of taxes paid, net operating cash flow was negative Rs 6.54 crore, compared with positive operating cash flow of Rs 21.45 crore in the year ended March 31, 2026.

Trade payables, other current liabilities and other financial liabilities provided partial offsets during the six months. The cash-flow statement records a Rs 43.26 crore increase in trade payables, a Rs 3.36 crore increase in other current liabilities and a Rs 2.11 crore increase in other financial liabilities, alongside a Rs 0.39 crore increase in short-term borrowings.

How much cash did inventory and receivables absorb?

Aarnav Fashions’ inventory and trade receivables absorbed a combined Rs 63.92 crore of cash during the six months ended September 30, 2026. Inventory rose from Rs 96.69 crore at March 31, 2026 to Rs 135.60 crore at September 30, while trade receivables increased from Rs 130.98 crore to Rs 155.99 crore.

The receivables and inventory increases were larger than the rise in other current assets, which increased by Rs 2.73 crore to Rs 18.05 crore. Cash and cash equivalents decreased by Rs 0.49 crore to Rs 3.70 crore, while bank balances other than cash and cash equivalents increased by Rs 0.07 crore to Rs 3.75 crore at September 30, 2026.

Trade payables reached Rs 80.03 crore at the half-year end, up from Rs 36.76 crore at March 31, 2026. The September balance included Rs 33.85 crore due to micro and small enterprises and Rs 46.18 crore due to parties other than micro and small enterprises. The balance-sheet increase broadly corresponds with the Rs 43.26 crore cash-flow offset from trade payables.

How did Aarnav Fashions fund the balance-sheet expansion?

Aarnav Fashions funded a Rs 65.06 crore increase in total assets mainly through higher liabilities and the period’s Rs 3.33 crore net profit. Total assets rose to Rs 463.14 crore at September 30, 2026 from Rs 398.08 crore at March 31, 2026, as current assets increased by Rs 66.24 crore to Rs 332.65 crore while non-current assets declined by Rs 1.18 crore to Rs 130.49 crore.

Total borrowings increased by Rs 14.68 crore to Rs 123.49 crore at September 30, 2026 from Rs 108.80 crore at March 31, 2026. Non-current borrowings rose by Rs 14.29 crore to Rs 28.62 crore, while current borrowings increased by Rs 0.39 crore to Rs 94.87 crore. The cash-flow statement separately reports Rs 14.29 crore of additions in borrowings and Rs 4.88 crore of finance expenses.

Net cash from financing activities was Rs 9.41 crore for the six months, after the reported borrowing additions and finance expenses. Aarnav Fashions also used Rs 3.36 crore in investing activities, entirely attributed to purchases or sales of assets in the cash-flow statement. These movements, together with the operating outflow, produced a Rs 0.49 crore decrease in cash and cash equivalents.

Equity increased by Rs 3.33 crore to Rs 199.92 crore, with equity share capital unchanged at Rs 42.24 crore and other equity rising to Rs 157.68 crore. Total liabilities increased by Rs 61.72 crore to Rs 263.22 crore, including current liabilities of Rs 209.75 crore compared with Rs 161.82 crore at March 31, 2026.

How did Aarnav Fashions’ revenue and profit compare?

Aarnav Fashions reported lower revenue and profit in the six months ended September 30, 2026 than in the corresponding period a year earlier. Revenue from operations declined by Rs 6.06 crore to Rs 214.89 crore from Rs 230.96 crore, while profit before tax fell by Rs 1.26 crore to Rs 4.43 crore from Rs 5.69 crore.

Net profit declined by Rs 0.93 crore to Rs 3.33 crore from Rs 4.26 crore, and basic earnings per share fell to Rs 0.79 from Rs 1.01. Material consumed increased by Rs 15.76 crore to Rs 161.43 crore, while purchases of stock-in-trade fell by Rs 13.74 crore to Rs 7.69 crore. Other expenses declined by Rs 8.73 crore to Rs 33.53 crore.

The September 2026 quarter contributed Rs 128.37 crore of the half-year revenue, compared with Rs 86.53 crore in the June 2026 quarter. However, September-quarter net profit was Rs 1.65 crore, slightly below Rs 1.68 crore in the June quarter. Finance costs were Rs 2.52 crore in the September quarter and Rs 2.57 crore in the June quarter.

Aarnav Fashions stated that it operates in a single segment, textile processing. The filing therefore does not provide revenue, profit, inventory or receivable data by multiple operating segments. The independent reviewer, Nahta Jain & Associates, issued its limited review report on November 3, 2026 and stated that nothing had come to its attention indicating a material misstatement in the unaudited standalone results.

Conclusion

Aarnav Fashions’ half-year statements show that reported profit did not convert into operating cash during the six months ended September 30, 2026. The Rs 63.92 crore combined rise in inventory and trade receivables outweighed Rs 13.86 crore of operating profit before working-capital changes, resulting in a Rs 6.54 crore operating cash outflow. The balance-sheet expansion was accompanied by a Rs 14.68 crore increase in total borrowings and a Rs 43.27 crore rise in trade payables.

The next disclosed matter to watch is Aarnav Fashions’ assessment of the Code of Social Security, 2020 and the Industrial Relations Code, 2020. Management said no effect had been recognised in the financial statements while it assesses the effect on employee benefits, employment terms and related compliance. Subsequent filings will also show whether the Rs 135.60 crore inventory and Rs 155.99 crore receivables balances convert into operating cash.