Annu Projects plans Rs 115 crore IPO working-capital funding

Annu Projects plans to deploy Rs 115 crore of net IPO proceeds for working capital, compared with Rs 15.408 crore for machinery and equipment. The proposed funding responds to net working-capital requirements projected at Rs 308.226 crore in Fiscal 2028, following a Rs 918.55 crore BharatNet Phase III work order and Fiscal 2026 receivables of 237 days.

Why is Annu Projects using IPO proceeds for working capital?

Annu Projects is using Rs 115 crore of IPO net proceeds for working capital because engineering, procurement and construction, or EPC, contracts require spending before customer collections are received. The company plans to deploy Rs 65 crore in Fiscal 2027 and Rs 50 crore in Fiscal 2028, while arranging the remaining requirements through internal accruals, existing equity and borrowings from banks and financial institutions.

Working capital is the excess of current assets over current liabilities, and Annu Projects reported a Rs 156.924 crore working-capital gap in Fiscal 2026. The gap rose from Rs 109.651 crore in Fiscal 2025 and Rs 45.411 crore in Fiscal 2024, as total current assets increased to Rs 289.585 crore while trade receivables and unbilled revenue expanded.

The stated IPO allocation is principally directed towards operating funding rather than equipment purchases. Annu Projects has earmarked Rs 15.408 crore for machinery or equipment, making the Rs 115 crore working-capital allocation more than seven times the identified capital-expenditure amount. The machinery allocation is scheduled entirely for Fiscal 2027, while working-capital deployment is scheduled across Fiscal 2027 and Fiscal 2028.

Annu Projects has not finalised the amount for general corporate purposes because the issue price and total net proceeds remain to be determined. The company states that this use cannot exceed 25% of gross proceeds under the Securities and Exchange Board of India Issue of Capital and Disclosure Requirements Regulations.

How does BharatNet Phase III increase Annu Projects' cash needs?

BharatNet Phase III increases Annu Projects' cash needs because the company received a Rs 918.55 crore work order, including goods and services tax, from G R Infraprojects Limited on March 10, 2026. The order was received as part of a consortium under BharatNet Phase III, and a substantial part is expected to be executed in Fiscal 2027 and Fiscal 2028.

The BharatNet Phase III programme aims to extend optical-fibre connectivity to more than 6.25 lakh villages and gram panchayats. Annu Projects says execution requires upfront mobilisation of telecom equipment, optical-fibre cables, civil resources, network-integration tools, specialised testing equipment and technical manpower, while billing and cash receipts are linked to project milestones.

EPC cash requirements also arise from non-fund-based instruments, including bank guarantees, performance securities and retention guarantees. These instruments can require margin money or term deposits with financial institutions, which locks funds during tendering, execution and post-completion periods. Annu Projects classifies security deposits and term deposits with residual maturities of more than three months and less than 12 months as other current financial assets.

Annu Projects also identifies railway signalling and telecommunications as another demand on operating funds after securing its first railway signalling project from Eastern Railway's Howrah Division. The prospectus does not disclose that project's value, but says railway projects require upfront signalling equipment, construction resources and specialised manpower alongside longer execution timelines and milestone-based billing.

What do receivables and unbilled revenue show about Annu Projects' cash cycle?

Annu Projects' cash cycle shows that a growing portion of project value can remain tied up in receivables and work completed but not yet billed. Trade receivables stood at Rs 156.77 crore at March 31, 2026, equivalent to 237 days, compared with Rs 80.413 crore and 163 days in Fiscal 2025 and Rs 58.035 crore and 138 days in Fiscal 2024.

Annu Projects attributes elevated receivables to business expansion, administrative delays at certain government departments, pending clearances and approvals from other authorities. The company also cites complex project execution and extended approval timelines as factors that can delay billing and collection under government-linked infrastructure contracts.

Annu Projects projects trade receivables of Rs 172.587 crore in Fiscal 2027 and Rs 226.324 crore in Fiscal 2028. Although the balance is projected to increase in each year, the assumed receivables holding period falls to 183 days in both years, based on expected realisation of outstanding dues, higher revenue booking and release of funds during the second half of Fiscal 2027.

Unbilled revenue, which represents revenue recognised before customer billing, is projected to rise from Rs 76.808 crore in Fiscal 2026 to Rs 109.305 crore in Fiscal 2027 and Rs 143.339 crore in Fiscal 2028. Annu Projects assumes the holding period remains at 116 days through Fiscal 2028 and links the projected increase to growth in project execution, revenue recognition and the BharatNet contract.

What must happen for Annu Projects' funding plan to work as projected?

Annu Projects' funding plan requires net working-capital requirements to be funded as they rise from Rs 156.924 crore in Fiscal 2026 to projected amounts of Rs 231.749 crore in Fiscal 2027 and Rs 308.226 crore in Fiscal 2028. The projections assume that the company can reduce receivables days from 237 in Fiscal 2026 to 183 days while executing a larger project book.

The projected funding mix holds short-term borrowings at Rs 39 crore in both Fiscal 2027 and Fiscal 2028. Internal accruals and existing net worth are expected to provide Rs 127.749 crore in Fiscal 2027 and Rs 219.226 crore in Fiscal 2028, alongside IPO proceeds of Rs 65 crore and Rs 50 crore respectively. Internal accruals and existing net worth are therefore the largest stated funding source in both projected years.

The assumptions also include inventory holding of 44 days in Fiscal 2027 and Fiscal 2028, compared with 12 days in Fiscal 2026. Trade payables are projected to increase from Rs 75.875 crore in Fiscal 2026 to Rs 89.209 crore in Fiscal 2027, even as payable days decline from 172 to 118 because Annu Projects plans more timely supplier payments to negotiate terms and prices.

Annu Projects states that its fund requirements and deployment schedule are based on its business plan, management estimates, market and technical factors, statutory-auditor certificates and vendor quotations. The requirements have not been appraised by a bank, financial institution or other independent agency, and the company says business conditions, access to capital, regulatory changes, interest rates and exchange rates could require a rescheduling or revision subject to applicable law.

Conclusion

Annu Projects' proposed IPO use is primarily an operating-capital funding plan, with Rs 115 crore allocated to working capital and Rs 15.408 crore to equipment. The projected need reflects the funding mechanics of larger EPC projects, including BharatNet Phase III, where upfront mobilisation, deposits supporting guarantees, milestone billing and collection periods can increase the cash committed to projects.

The disclosed measure to watch is whether receivables holding falls from 237 days in Fiscal 2026 to 183 days in Fiscal 2027 while unbilled revenue rises from Rs 76.808 crore to Rs 109.305 crore. Annu Projects plans to deploy Rs 65 crore in Fiscal 2027 and Rs 50 crore in Fiscal 2028, but has stated that the schedule may change if its funding requirements or operating conditions change.