Farm Peace to Deploy Rs 23 Crore of IPO Funds as Receivables Hit 172

Farm Peace proposes to deploy Rs 23 crore of IPO net proceeds into incremental working capital in Fiscal 2027 after trade receivable days rose to 172 in Fiscal 2026 from 78 in Fiscal 2024. The allocation represents 82.73% of estimated net proceeds of Rs 27.80 crore and is intended to fund a seasonal potato-supply cycle.

Why is Farm Peace deploying Rs 23 crore of IPO funds into working capital?

Farm Peace is allocating Rs 23 crore because its contract-farming and processed-potato supply model requires funding before customer collections arrive. The fresh issue is expected to generate gross proceeds of Rs 32.0016 crore, less estimated issue expenses of Rs 4.2016 crore, resulting in estimated net proceeds of Rs 27.80 crore. The remaining Rs 4.80 crore is allocated to general corporate purposes.

Farm Peace plans to deploy all Rs 27.80 crore of estimated net proceeds in Fiscal 2027. Working capital, calculated as current assets less current liabilities, finances seed procurement, payments to farmers, cold-storage charges, logistics and customer credit. The proposed funding requirement and deployment schedule are based on management estimates and have not been appraised by a bank, financial institution or independent agency.

Farm Peace says the seasonal crop cycle creates the timing mismatch. Harvesting generally occurs in the third and fourth quarters of each fiscal year, while most billing is concentrated in the fourth quarter. At the March 31 year-end, Farm Peace can therefore carry receivables while having already committed cash to seed purchases, procurement, storage and field operations.

How did Farm Peace's working-capital cycle change by Fiscal 2026?

Farm Peace's working-capital requirement rose to Rs 53.3347 crore at March 31, 2026, from Rs 36.9965 crore at March 31, 2025 and Rs 12.4150 crore at March 31, 2024. Current assets increased to Rs 98.4006 crore at March 31, 2026, while current liabilities were Rs 45.0659 crore. Trade receivables were the largest current-asset item at Rs 59.9522 crore.

Trade receivable days, measured using average closing trade receivables and revenue from operations, increased by 94 days between Fiscal 2024 and Fiscal 2026. Farm Peace attributes the Fiscal 2026 rise mainly to higher sales to institutional buyers and food processors, whose credit cycles typically range from 70 to 180 days, and to higher sales in the closing months of the fiscal year.

Farm Peace also attributes part of the Fiscal 2026 movement to a three-to-four-week delay in harvesting and procurement caused by climatic conditions. The delay shifted procurement, sales and collection timing at the March 31 balance-sheet date. Farm Peace describes the event as atypical, and says its receivables remained within agreed credit terms and recoverable in the normal course of business.

What else is tying up Farm Peace's cash in the operating cycle?

Farm Peace's inventory days rose to 101 in Fiscal 2026 from 46 in Fiscal 2024, and inventory stood at Rs 19.4584 crore at March 31, 2026. Inventory principally comprises seed potatoes and harvested processing-grade potatoes kept in leased cold-storage facilities. Farm Peace says it increased buffer stocks in Fiscal 2025 and Fiscal 2026 to maintain supply through non-harvest months.

Trade payables partly finance procurement and storage, but payable days did not rise as much as receivable days. Payable days rose to 134 in Fiscal 2026 from 83 in Fiscal 2024, while trade payables reached Rs 30.6886 crore. Farm Peace says potato procurement from farmers and suppliers generally takes place from January to March, with payments often settled by April and some related sales recognised in the following financial year.

Farm Peace's funding mix also changed as the working-capital requirement expanded. Internal accruals and equity funded Rs 42.0577 crore at March 31, 2026, compared with Rs 5.2977 crore at March 31, 2024. Borrowings from banks, financial institutions and non-banking financial companies were Rs 8.4897 crore in Fiscal 2026, compared with Rs 3.5608 crore in Fiscal 2024, while unsecured related-party loans declined to Rs 2.7873 crore from Rs 3.5565 crore.

What assumptions support Farm Peace's Fiscal 2027 working-capital plan?

Farm Peace's Fiscal 2027 estimate assumes receivable days will decline to 141, inventory days to 83 and payable days to 102. It projects a total working-capital requirement of Rs 76.0199 crore, funded by Rs 4 crore of borrowings, Rs 49.0199 crore of internal accruals and equity, and the Rs 23 crore IPO funding gap. The plan consequently depends on collections occurring faster than in Fiscal 2026.

For Fiscal 2028, Farm Peace projects working-capital requirements of Rs 88.1188 crore with no IPO funding gap or planned borrowings. The projection assumes receivable days of 98, inventory days of 81 and payable days of 65. Farm Peace says it commenced table-potato sales through quick-commerce channels in Fiscal 2026-27, where credit periods are significantly shorter than its historical supply contracts.

Farm Peace also links the projected funding need to expansion plans. It intends to expand contract-farming acreage to more than 7,000 acres and engage more than 1,100 farmers by Fiscal 2027. The plan includes additional cold-storage capacity, expansion beyond Gujarat into other potato-producing regions, and exploration of groundnut and watermelon as additional crops.

Farm Peace disclosed a confirmed order book of Rs 35.90 crore at the prospectus filing date, covering Santana, Frysona and Lady Rosetta potato supplies to food processors and snack manufacturers. It expects 100% realisation within the operating cycle by March 31, 2027. The disclosed order book excludes rolling orders from back-consumer platforms, which Farm Peace says generally have shorter credit periods.

Conclusion

Farm Peace's Rs 23 crore working-capital allocation is connected to an operating cycle that became more cash-intensive between Fiscal 2024 and Fiscal 2026. Over that period, receivable days increased from 78 to 172, inventory days from 46 to 101, and the working-capital requirement from Rs 12.4150 crore to Rs 53.3347 crore, despite payable days increasing from 83 to 134.

The next disclosed test is Fiscal 2027 execution, when Farm Peace plans to deploy all estimated net proceeds while reducing receivable days to 141 and inventory days to 83. Farm Peace's Board approved the projected working-capital requirement on June 9, 2026, and its statutory auditors certified the working-capital statement on August 24, 2026 without providing assurance on prospective financial information. Until the working-capital proceeds are fully used, Farm Peace must submit statutory-auditor certificates to BSE SME with its quarterly or half-yearly financial results.