Nityas Gems’ operating cash outflow persisted for three years

Nityas Gems recorded negative operating cash flow in Fiscal 2024, Fiscal 2025 and Fiscal 2026 despite reporting profits, with the outflow rising to Rs 14.732 crore in Fiscal 2026 from Rs 1.051 crore in Fiscal 2024. The company attributes the pattern to greater cash deployment in inventory and trade receivables, while Rs 16.858 crore of financing inflow supported liquidity in Fiscal 2026.

Why did Nityas Gems’ operating cash outflow persist?

Nityas Gems’ operating cash outflow persisted because its business required cash for working capital before it collected payments from customers. Net cash used in operating activities increased from Rs 1.051 crore in Fiscal 2024 to Rs 10.052 crore in Fiscal 2025 and Rs 14.732 crore in Fiscal 2026. Operating cash flow measures cash generated or used by core business activities, rather than accounting profit.

Nityas Gems designs, manufactures and sells lab-grown diamond-studded gold jewellery predominantly through a business-to-business, or B2B, model. The company makes upfront payments for gold bullion and lab-grown diamonds, then supplies finished jewellery against purchase orders with agreed customer credit periods. This sequence creates a timing difference between procurement payments and sales collections.

Nityas Gems states that negative operating cash flow occurred despite profits primarily because of significant working-capital deployment. Working capital is current assets less current liabilities and represents funds required for routine operations. On a standalone basis, Nityas Gems’ working-capital requirement rose from Rs 6.765 crore in Fiscal 2024 to Rs 25.112 crore in Fiscal 2025 and Rs 44.946 crore in Fiscal 2026.

The three-fiscal progression shows that the operating outflow widened as the company scaled its activity. Nityas Gems also reported cash used in investing activities of Rs 1.993 crore in Fiscal 2026, mainly for capital expenditure on property, plant and equipment and manufacturing capabilities. The corresponding investing outflows were Rs 41.9 lakh in Fiscal 2025 and Rs 82.5 lakh in Fiscal 2024.

Which assets absorbed Nityas Gems’ cash?

Inventories and trade receivables absorbed most of Nityas Gems’ working capital as operations expanded. Inventory increased from Rs 5.135 crore in Fiscal 2024 to Rs 25.462 crore in Fiscal 2025 and Rs 41.054 crore in Fiscal 2026. Trade receivables, which are amounts due from customers for credit sales, increased from Rs 4.064 crore to Rs 8.752 crore and then Rs 16.064 crore over the same period.

Together, inventory and trade receivables accounted for Rs 57.118 crore of Nityas Gems’ Rs 58.116 crore of current assets in Fiscal 2026, or about 98%. The company holds inventory as raw materials, work in process and finished goods to support production, product variety, order fulfilment and customer engagement. Cash remains committed until stock is sold and receivables are collected.

Nityas Gems’ operating cycle also increased with the scale of operations in Fiscal 2026. Inventory holding reached 59 days and receivable days reached 22 days during that fiscal. An operating cycle tracks the time funds remain committed between buying inputs and collecting sale proceeds, so a further rise in inventory or receivable days would increase working-capital needs.

How has Nityas Gems funded its cash requirement?

Nityas Gems has funded working-capital requirements through internal accruals and borrowings, while its liquidity has historically been supported by share-capital issuance and borrowings. Net cash from financing activities was Rs 1.726 crore in Fiscal 2024, Rs 10.715 crore in Fiscal 2025 and Rs 16.858 crore in Fiscal 2026. These financing inflows were positive in each of the three reported fiscals.

In Fiscal 2026, the Rs 16.858 crore financing inflow covered the Rs 14.732 crore operating outflow and Rs 1.993 crore investing outflow, resulting in a Rs 13.3 lakh increase in cash and cash equivalents. Cash and cash equivalents ended Fiscal 2026 at Rs 54.2 lakh, compared with Rs 29.7 lakh at the end of Fiscal 2025 and Rs 5.3 lakh at the end of Fiscal 2024. The Fiscal 2026 closing balance included Rs 11.3 lakh added on the acquisition of a subsidiary.

This funding pattern means financing, rather than cash generated by operations, offset the reported operating and investing cash outflows. Nityas Gems says a reduction in financing availability or an inability to raise funds on acceptable terms could affect liquidity. The disclosure does not specify future borrowing amounts, interest rates or other financing terms.

What could keep Nityas Gems’ operating cash outflow negative?

Nityas Gems’ operating cash outflow could remain negative if inventory, receivables or raw-material funding requirements grow faster than cash collections. The company estimates that its working-capital requirement will rise to Rs 110.308 crore in Fiscal 2027, compared with Rs 44.946 crore in Fiscal 2026. The Fiscal 2027 amount is an estimate of capital required, not reported cash flow.

The direction of cash flow depends on the cost and availability of gold bullion and lab-grown diamonds, customer credit periods, inventory levels and working-capital forecasts. Nityas Gems identifies raw-material price movements, longer receivable cycles, higher-than-expected inventory and constraints on additional financing as factors that could affect liquidity. For operating cash flow to improve, customer collections and inventory turnover would need to offset the B2B model’s upfront procurement requirement.

Supplier concentration adds to this funding sensitivity. Nityas Gems’ top 10 suppliers accounted for 86.16% of total purchases in Fiscal 2026, while its largest supplier accounted for 55.11%. The company generally does not enter long-term procurement contracts with most suppliers, meaning changes in pricing, credit terms or delivery schedules could change the cash needed to obtain key raw materials.

Nityas Gems proposes to use a portion of net issue proceeds for working-capital requirements. The company also states that these proceeds may not be sufficient for future needs and that additional financing may be required. The plan therefore depends on the timing of issue-proceeds use, continued access to financing and management of inventory and receivable cycles.

Conclusion

Nityas Gems’ profits did not translate into positive operating cash flow during the three fiscals disclosed because more funds were committed to inventory and customer receivables. The operating outflow increased from Rs 1.051 crore in Fiscal 2024 to Rs 14.732 crore in Fiscal 2026, while financing inflows rose from Rs 1.726 crore to Rs 16.858 crore over the same period.

The disclosed Fiscal 2027 working-capital estimate of Rs 110.308 crore is the next measure to watch. Nityas Gems plans to apply part of net issue proceeds to working capital but says the funds may not be sufficient, leaving inventory days, receivable days and availability of additional financing as relevant determinants of future operating cash flow.