Garg Furnace operating cash outflow widens to Rs 5.35 crore

Garg Furnace Limited reported a standalone operating cash outflow of Rs 5.35 crore for the half year ended 30 September 2026, widening from Rs 3.04 crore a year earlier, as Rs 13.91 crore absorbed by trade and other receivables outweighed Rs 7.17 crore of operating profit before working-capital changes.

Why did Garg Furnace report an operating cash outflow?

Garg Furnace reported the outflow because working-capital movements absorbed Rs 12.46 crore during the half year ended 30 September 2026, exceeding the Rs 7.17 crore operating profit generated before those changes. Cash generated from operations consequently turned negative at Rs 5.29 crore, and Rs 5.41 lakh of taxes paid took net operating cash flow to negative Rs 5.35 crore.

The comparison with the prior-year half year shows that the cash deficit widened by Rs 2.31 crore, from negative Rs 3.04 crore in the half year ended 30 September 2025. Operating profit before working-capital changes increased from Rs 4.59 crore to Rs 7.17 crore, but the working-capital outflow rose from Rs 7.52 crore to Rs 12.46 crore. The higher pre-working-capital measure therefore did not result in positive operating cash flow.

How much cash did receivables absorb at Garg Furnace?

Trade and other receivables absorbed Rs 13.91 crore of cash in the half year ended 30 September 2026, compared with Rs 2.46 crore in the corresponding 2025 period. This was the largest individual working-capital cash movement disclosed in the standalone cash-flow statement and was larger than Garg Furnace’s Rs 7.17 crore operating profit before working-capital changes.

The standalone balance sheet separately reported current trade receivables of Rs 24.05 crore at 30 September 2026, up from Rs 19.78 crore at 31 March 2026. Non-current trade receivables declined to Rs 67.51 lakh from Rs 86.59 lakh over the same dates. The cash-flow line includes trade and other receivables, while the balance-sheet line identifies trade receivables only, so the two measures are not directly identical.

What other working-capital movements affected cash flow?

Inventories absorbed Rs 2.48 crore of cash in the half year ended 30 September 2026, while trade payables and other liabilities provided Rs 3.93 crore. The receivables movement was the main cash drain because the inflow from payables and other liabilities did not offset the combined outflows from receivables and inventories.

Standalone inventory increased to Rs 22.06 crore at 30 September 2026 from Rs 19.58 crore at 31 March 2026. Current liabilities rose to Rs 27.50 crore from Rs 21.10 crore, including trade payables to creditors other than micro and small enterprises of Rs 13.24 crore, compared with Rs 9.34 crore. These balance-sheet movements correspond with the direction of the cash-flow working-capital movements, although the categories are not presented on the same basis.

Did profit and cash balances move in opposite directions at Garg Furnace?

Yes. Garg Furnace reported standalone profit before tax of Rs 5.71 crore for the half year ended 30 September 2026, compared with Rs 3.99 crore in the previous-year half year, while net cash used in operating activities increased to Rs 5.35 crore from Rs 3.04 crore. Depreciation and amortisation of Rs 87.64 lakh and total adjustments of Rs 1.46 crore lifted operating profit before working-capital changes to Rs 7.17 crore.

Cash and cash equivalents fell to Rs 16.91 lakh at 30 September 2026 from Rs 3.50 crore at the beginning of the financial year. Garg Furnace recorded Rs 13.33 lakh of net cash from investing activities and Rs 1.88 crore of net cash from financing activities, but those inflows did not cover the operating outflow. Net cash and cash equivalents declined by Rs 3.33 crore during the half year, compared with a Rs 9.48 crore decline in the prior-year period.

What financing and business context did Garg Furnace disclose?

Garg Furnace reported non-current borrowings of Rs 13.07 crore and current borrowings of Rs 7.19 crore at 30 September 2026, compared with Rs 12.48 crore and Rs 5.04 crore, respectively, at 31 March 2026. Its financing cash-flow statement lists repayments of Rs 2.14 crore for short-term borrowings and Rs 58.87 lakh for long-term borrowings, alongside finance costs paid of Rs 84.78 lakh.

Garg Furnace operates in one reportable business segment, manufacturing iron and steel products including M.S. Round, ingot and wire rod. Its board approved 13.98 lakh convertible warrants at Rs 126.50 each, aggregating to Rs 17.68 crore, on 31 July 2026, and shareholders approved the issue on 29 August 2026. Each warrant holder has the right to apply for one fully paid equity share within 18 months, according to the filing.

Conclusion

Garg Furnace’s half-year figures show that reported profit and operating cash generation moved in different directions. Profit before tax increased to Rs 5.71 crore in the half year ended 30 September 2026, but Rs 13.91 crore absorbed by trade and other receivables, alongside a Rs 2.48 crore inventory cash outflow, resulted in a Rs 5.35 crore operating cash outflow.

The next disclosed development to watch is the 13.98 lakh convertible-warrant issue, for which holders have an 18-month period to apply for shares after the July and August 2026 approvals. Subsequent standalone disclosures will also show whether current trade receivables of Rs 24.05 crore, inventory of Rs 22.06 crore and cash and cash equivalents of Rs 16.91 lakh change.