HFL expects net recognition to lift H2 operating cash flow

Hindustan Foods Limited reported Rs 57.7 crore of net cash from operating activities in H1FY27 and said additional customer conversions to net revenue recognition from Q4FY27, alongside recently announced GST changes, should deliver significantly stronger H2FY27 cash flow without changing profitability.

Why did HFL’s H1FY27 operating cash flow trail the prior year?

HFL’s H1FY27 net cash from operating activities fell to Rs 57.7 crore from Rs 109.5 crore in H1FY26 because working-capital changes absorbed Rs 144.6 crore, compared with an outflow of Rs 48.4 crore a year earlier. Operating profit before working-capital changes nevertheless increased to Rs 219.5 crore from Rs 172.7 crore.

The company attributed the cash-flow pressure to GST rate changes under an inverted duty structure and a proactive inventory build-up. HFL said cash flow from operations was negative Rs 9.5 crore in H2FY26 before recovering to Rs 57.7 crore in H1FY27, while it retained its inventory stance through H1FY27 because of continuing geopolitical uncertainty.

HFL’s earnings grew despite the cash conversion gap. H1FY27 total revenue rose 18.0% year on year to Rs 2,476.4 crore, earnings before interest, tax, depreciation and amortisation, or EBITDA, increased 25.8% to Rs 221.6 crore, and profit after tax rose 27.6% to Rs 87.8 crore.

How will net revenue recognition affect HFL’s cash conversion?

HFL said moving select customer businesses from gross to net revenue recognition releases working capital without affecting profitability. It began the transition to address the inverted duty structure and said early progress contributed to the improvement from negative Rs 9.5 crore cash flow from operations in H2FY26 to Rs 57.7 crore in H1FY27.

Additional customers have agreed to move to net revenue recognition from Q4FY27, according to HFL. The company expects those conversions and the benefit of recently announced GST changes to produce significantly stronger cash flow from operations in H2FY27 and help fund growth projects.

The presentation does not disclose the number of customers already converted, the revenue covered, or the rupee amount of working capital expected to be released. It does show that the planned benefit concerns cash conversion rather than a stated increase in H1FY27 profit after tax of Rs 87.8 crore.

What balance-sheet movements explain HFL’s working-capital use?

HFL’s inventories increased by Rs 181.0 crore to Rs 1,150.5 crore at 30 September 2026 from Rs 969.5 crore at 31 March 2026. Trade receivables were broadly unchanged at Rs 252.2 crore, compared with Rs 254.8 crore, while trade payables increased by Rs 117.1 crore to Rs 750.0 crore.

Cash and cash equivalents declined to Rs 17.0 crore at 30 September 2026 from Rs 35.9 crore at 31 March 2026. Net cash used in investing activities was Rs 158.3 crore in H1FY27, against Rs 160.9 crore in H1FY26, while financing activities generated Rs 81.8 crore, up from Rs 45.2 crore.

Borrowings rose alongside the investment programme. Non-current borrowings reached Rs 778.6 crore from Rs 725.5 crore at 31 March 2026, and current borrowings increased to Rs 404.3 crore from Rs 324.5 crore, making HFL’s stated plan to improve operating cash flow relevant to the funding of its projects.

Which projects could stronger H2FY27 cash flow help fund?

HFL expects gross block to reach Rs 2,367 crore by March 2027 from Rs 1,961 crore in September 2026, based on Rs 89 crore of in-progress projects and Rs 317 crore of new projects. Its gross-block measure includes capital work-in-progress, capital advances and leasehold land, excludes right-of-use and intangible assets, and is adjusted for accumulated depreciation of acquired plants.

In home and personal care, HFL’s Rs 40 crore Silvassa liquid-detergent facility was commercialised in Q2FY27, while the Rs 50 crore Lucknow detergent-bars plant is scheduled for Q4FY27 after a one-to-two-month delay in imported equipment. The Silvassa facility’s ramp-up was affected by floods and is expected to be completed by the end of Q3FY27.

Food and beverages projects scheduled for Q4FY27 include Greek yoghurt manufacturing in Goa at Rs 60 crore, a bottled-water and juices plant in Aurangabad at Rs 70 crore, a bottled-water plant in Mysuru at Rs 50 crore, and a Rs 15 crore carbonated soft-drinks line in Guwahati. HFL also expects its Rs 50 crore Hyderabad plant for bottled water, juices and glucose drinks to be commercialised in Q1FY28.

What does HFL’s FY27 outlook indicate for the second half?

HFL has guided for FY27 profit after tax of Rs 200 crore to Rs 220 crore, with H1FY27 expected to contribute 43% to 48% and H2FY27 expected to contribute 52% to 57%. Reported H1FY27 profit after tax was Rs 87.8 crore, including a Rs 1.3 crore exceptional loss from the insurance-policy deductible following floods at the Silvassa facility.

The second-half operating plan includes project commissioning and capacity additions that are separate from the revenue-recognition transition. The Rs 80 crore Panipat ice-cream Phase II expansion, intended to double existing capacity, is due in Q4FY27, while a Rs 6 crore cones-and-sleeves line in Nashik is scheduled for Q1FY28.

HFL also said its footwear division turned profitable in Q2FY27 and that October 2026 produced its highest-ever monthly turnover, with the order book full until March 2027. In manufacturing mix, shared manufacturing accounted for 30% of H1FY27 EBITDA, compared with 26% in FY26, and HFL expects a higher contribution in FY27 through capacity scale-up, customer partnerships and asset utilisation.

Conclusion

HFL’s disclosed recovery plan centres on reversing working-capital pressure rather than relying only on profit growth. Operating profit before working-capital changes increased to Rs 219.5 crore in H1FY27, but the Rs 144.6 crore working-capital outflow reduced net operating cash to Rs 57.7 crore. The shift to net revenue recognition is intended to alter that cash conversion without changing profitability.

The next disclosed milestones are additional customer conversions from Q4FY27, the actual H2FY27 cash-flow outcome and project commissioning through Q1FY28. Investors can also watch whether inventories, which stood at Rs 1,150.5 crore at September 2026, change as HFL maintains the inventory stance it adopted amid geopolitical uncertainty.