Farm Peace profit growth accompanied three years of cash outflows

Farm Peace Limited reported rising profit after tax from Rs 6.16 crore in FY24 to Rs 7.53 crore in FY26, while net cash from operating activities was negative in each year. The FY26 gap was led by a Rs 34.28 crore increase in trade receivables, which exceeded Rs 12.49 crore of operating profit before working-capital changes.

Why did Farm Peace profit growth not produce operating cash?

Farm Peace recorded higher revenue and profit under accrual accounting, but the conversion of recorded sales into cash was interrupted by working-capital movements. Revenue from agricultural-produce sales increased to Rs 90.83 crore in FY26 from Rs 79.24 crore in FY25 and Rs 62.55 crore in FY24. Profit before tax rose to Rs 10.84 crore in FY26 from Rs 9.65 crore in FY25, while profit after tax reached Rs 7.53 crore after a Rs 3.31 crore tax expense.

Operating cash flow measures cash generated by regular revenue-producing activities after working-capital changes, rather than profit recognised on an accrual basis. Farm Peace prepares its cash-flow statement using the indirect method under Accounting Standard 3, beginning with profit before tax and adjusting for non-cash items, operating assets and operating liabilities. Net cash from operating activities was negative Rs 7.17 crore in FY26, negative Rs 17.57 crore in FY25 and negative Rs 1.54 crore in FY24 despite profit after tax in all three years.

The cash deficit arose after Farm Peace generated Rs 12.49 crore of operating profit before working-capital changes in FY26, Rs 10.01 crore in FY25 and Rs 9.39 crore in FY24. Receivables absorbed cash in each period, and loans and advances were an additional major outflow in FY25. Positive operating cash would require cash receipts from customers and movements in inventory, advances, payables and other liabilities that do not consume more cash than operations generate.

How much did receivables contribute to Farm Peace’s cash outflows?

Receivables were Farm Peace’s largest disclosed FY26 working-capital outflow. Trade receivables increased by Rs 34.28 crore in FY26, compared with increases of Rs 8.49 crore in FY25 and Rs 7.50 crore in FY24. The FY26 rise was nearly 2.7 times the company’s Rs 12.49 crore operating profit before working-capital changes, leaving cash generated from operations negative despite offsets from inventories and liabilities.

Trade receivables more than doubled to Rs 59.95 crore at March 31, 2026 from Rs 25.67 crore a year earlier, and were 3.5 times the Rs 17.18 crore balance at March 31, 2024. Farm Peace classified the entire FY26 balance as unsecured and considered good. The company uses a 12-month operating cycle for current and non-current classification, but current classification does not itself establish when customer balances will be collected.

The FY26 ageing schedule placed Rs 51.77 crore of receivables, or about 86% of the total, in the less-than-six-month category and Rs 8.18 crore in the six-month-to-one-year category. No balance was shown as more than one year old, disputed or doubtful at March 31, 2026. Subsequent operating cash generation will therefore depend materially on collection of the Rs 59.95 crore unsecured balance within those disclosed ageing bands.

Which other working-capital items offset the receivables increase?

Inventory, trade payables and other liabilities partly offset Farm Peace’s receivables build-up in FY26, but not sufficiently to produce positive operating cash flow. Inventory fell by Rs 3.43 crore during FY26 to Rs 19.46 crore, after rising by Rs 13.17 crore in FY25 and Rs 6.31 crore in FY24. Farm Peace values agricultural produce, seeds, agri-inputs and other trading goods at the lower of cost and net realisable value, using the first-in, first-out method.

Trade payables increased by Rs 4.96 crore in FY26 to Rs 30.69 crore, after a Rs 13.57 crore increase in FY25. Other liabilities increased by Rs 5.92 crore in FY26, including customer advances of Rs 3.21 crore and sundry creditors for expenses of Rs 4.11 crore. These increases supplied operating cash because they represented obligations unpaid at year-end, whereas the receivables increase represented sales not yet collected.

Short-term loans and advances declined by Rs 0.33 crore in FY26, providing a limited cash offset, after increasing by Rs 18.21 crore in FY25. Supplier advances were Rs 18.52 crore of the Rs 18.99 crore short-term loans and advances at March 31, 2026. The supplier-advance balance was broadly unchanged from Rs 18.58 crore in FY25 but remained far above Rs 0.97 crore in FY24, keeping cash committed to suppliers even as FY26 inventory declined.

How did Farm Peace fund the operating cash deficit?

Farm Peace’s financing cash inflow broadly covered its FY26 operating cash deficit, alongside higher balance-sheet borrowings. Net cash from financing activities was Rs 7.25 crore in FY26, compared with Rs 15.30 crore in FY25 and Rs 4.87 crore in FY24. FY26 financing included Rs 3.07 crore of long-term borrowing increases and a net Rs 5.35 crore increase in short-term borrowings, partly offset by Rs 1.57 crore of finance charges.

Total long-term and short-term borrowings rose to Rs 11.28 crore at March 31, 2026 from Rs 2.46 crore at March 31, 2025. The FY26 balance comprised Rs 3.14 crore of long-term borrowings and Rs 8.14 crore of short-term borrowings. Short-term borrowings included a Rs 3.02 crore bank overdraft, Rs 2.79 crore of loans from directors and promoters, and Rs 2.33 crore of current maturities of unsecured bank loans.

Finance costs rose to Rs 1.57 crore in FY26 from Rs 28.23 lakh in FY25 and Rs 24.15 lakh in FY24. FY26 costs included Rs 53.93 lakh of interest on unsecured loans, Rs 30.96 lakh of overdraft interest and Rs 43.21 lakh of interest on statutory dues. Farm Peace reported Rs 10.73 lakh of cash and cash equivalents at March 31, 2026, comprising Rs 10.51 lakh in bank balances and Rs 0.22 lakh of cash on hand.

Conclusion

Farm Peace’s FY24-to-FY26 financial information shows that rising reported profit did not translate into operating cash generation. Revenue increased by Rs 28.28 crore and profit after tax increased by Rs 1.37 crore over the period, while operating cash flow remained negative because trade receivables rose by Rs 42.77 crore from FY24 to FY26 and supplier advances remained elevated.

The next financial update should clarify whether Farm Peace collects the Rs 59.95 crore of FY26 receivables, including Rs 51.77 crore aged below six months, and whether this reduces reliance on financing inflows. The disclosed borrowing mix, including overdraft, director and promoter loans, and current maturities of unsecured bank loans, also makes changes in finance costs and short-term obligations relevant to future cash requirements.