GNFC operating cash flow drops 55% as working capital rises

Gujarat Narmada Valley Fertilizers & Chemicals Limited reported a 55% year-on-year fall in standalone operating cash flow to Rs 141 crore for the six months ended September 30, 2026, despite profit before tax rising to Rs 657 crore, because trade receivables and inventories together absorbed Rs 577 crore of cash.

What caused GNFC’s operating cash flow to fall?

GNFC’s operating cash flow fell because working-capital movements reduced cash generated from operations to Rs 288 crore in the six months ended September 30, 2026, from Rs 420 crore a year earlier. The main outflows were a Rs 328 crore increase in trade receivables, including subsidy receivable, and a Rs 249 crore increase in inventories.

The Rs 577 crore combined outflow from receivables and inventories contrasted with the prior-year period, when receivables released Rs 35 crore and inventories released Rs 208 crore. These two lines therefore moved from a combined Rs 243 crore source of cash in the six months ended September 30, 2025 to a Rs 577 crore use in 2026, a Rs 820 crore swing.

GNFC also recorded a Rs 57 crore cash outflow in financial assets and a Rs 23 crore outflow in loans, advances and other assets. These uses were partly offset by Rs 143 crore from trade payables and other liabilities, Rs 102 crore from financial liabilities, and Rs 25 crore from provisions, but the offsets did not fully counter the receivables and inventory build-up.

How did GNFC’s profit compare with cash generation?

GNFC’s profit before tax nearly doubled to Rs 657 crore from Rs 335 crore, while net operating cash flow dropped to Rs 141 crore from Rs 314 crore. The difference reflects the working-capital outflows and Rs 147 crore of income taxes paid during the six-month period.

Operating profit before working-capital changes was Rs 675 crore, compared with Rs 322 crore a year earlier. The reconciliation included Rs 159 crore of depreciation and amortisation, offset by Rs 155 crore of interest income, Rs 29 crore of dividend income and Rs 30 crore of grant-income amortisation under the indirect cash-flow method prescribed by Indian Accounting Standard 7, or Ind AS 7.

After working-capital changes, cash generated from operations was Rs 288 crore, down Rs 132 crore from Rs 420 crore in the comparable period. Tax payments then increased to Rs 147 crore from Rs 106 crore, taking the decline in net cash from operating activities to Rs 173 crore, or about 55%, even as profit before tax increased by Rs 322 crore.

How did GNFC use cash outside operations?

GNFC used Rs 310 crore in financing activities in the six months ended September 30, 2026, largely because it paid Rs 301 crore of dividends. Financing cash outflow was Rs 46 crore higher than the Rs 264 crore outflow a year earlier, when dividends paid were Rs 258 crore.

Investing activities used Rs 3 crore, compared with a Rs 28 crore inflow in the prior-year period. GNFC spent Rs 332 crore on property, plant and equipment, including capital work-in-progress and capital advances, versus Rs 348 crore a year earlier; this was partly offset by Rs 321 crore of proceeds from sale or maturity of investments and other advances, plus a Rs 565 crore decrease in corporate deposits.

The investing section also shows a Rs 706 crore increase in deposits or balances with banks, compared with a Rs 460 crore decrease in the previous period. Interest received fell to Rs 148 crore from Rs 213 crore, while the combined investing result was close to neutral because investment, deposit and capital-expenditure movements offset one another.

Why did GNFC end the period with negative cash equivalents?

GNFC ended September 30, 2026 with net cash and cash equivalents of negative Rs 98 crore, compared with negative Rs 2 crore a year earlier, after a Rs 172 crore decline during the period. The period began with Rs 74 crore of net cash and cash equivalents, whereas the previous period began with negative Rs 80 crore.

The cash-equivalent components were Rs 11 crore, comprising Rs 7 crore of debit balances in cash-credit and overdraft accounts and Rs 4 crore in current accounts. GNFC then deducted Rs 109 crore of cash-credit and overdraft accounts, producing the negative Rs 98 crore net figure; the comparable deduction was Rs 8 crore in the prior-year period.

The balance sheet separately reported Rs 109 crore of current borrowings at September 30, 2026, against no such borrowing at March 31, 2026. It also showed inventories rising to Rs 1,259 crore from Rs 1,018 crore and trade receivables rising to Rs 969 crore from Rs 641 crore, consistent with the cash-flow statement’s working-capital absorption.

What should readers compare in GNFC’s next cash-flow disclosure?

GNFC’s next cash-flow disclosure will show whether the Rs 328 crore receivables increase and Rs 249 crore inventory increase reverse, stabilise or rise further after September 30, 2026. The financial results provide no working-capital target or cash-flow guidance, so they do not establish when these balances may convert back into cash.

GNFC’s board approved the September 2026 results on November 2, 2026, and the statutory auditors issued an unmodified limited-review conclusion. GNFC also said its Bharuch manufacturing facilities had a planned 18-day shutdown from April 1 to April 18, 2025, making the six months ended September 30, 2026 not comparable with the corresponding prior half year.

Conclusion

GNFC generated higher pre-tax profit of Rs 657 crore in the six months ended September 30, 2026, but its cash conversion weakened as receivables and inventories absorbed Rs 577 crore. Net operating cash flow of Rs 141 crore, Rs 301 crore of dividends and Rs 332 crore of capital spending contributed to a Rs 172 crore reduction in net cash and cash equivalents.

What to watch next is the movement in receivables, including subsidy receivable, inventories and the Rs 109 crore cash-credit and overdraft balance. GNFC disclosed no cash-flow target or working-capital plan, while it specifically noted that the April 2025 shutdown limits comparison with the prior-year six-month period.