Phychem’s cash flow fell 69% as FY26 pre-tax profit rose 45%

Phychem generated Rs 78 lakh of net operating cash flow in FY26, the year ended March 31, 2026, compared with Rs 2.5328 crore in FY25. The 69% decline occurred even as Phychem’s profit before tax increased 45% to Rs 5.5445 crore, because inventory, receivables and other working-capital movements used Rs 5.0553 crore of cash.

Why did Phychem’s operating cash flow fall in FY26?

Phychem’s operating cash flow fell because its working-capital outflow expanded to Rs 5.0553 crore in FY26 from Rs 1.8854 crore in FY25. Working capital is the cash tied up in short-term operating assets and liabilities, including inventory, trade receivables, trade payables and other current liabilities. Phychem uses the indirect method of cash-flow reporting, which adjusts profit before tax for non-cash items and changes in these balances.

Net cash generated from operating activities was Rs 78 lakh in FY26, down from Rs 2.5328 crore in FY25 and Rs 2.6594 crore in FY24. Cash generated from operations before income-tax payments declined to Rs 1.9872 crore from Rs 3.25 crore in FY25, while income tax paid increased to Rs 1.2072 crore from Rs 71.72 lakh. The FY26 operating cash figure was also 71% below the Rs 2.6594 crore reported in FY24.

The reduction followed a rise in operating profit before working-capital changes to Rs 7.0425 crore in FY26, from Rs 5.1354 crore in FY25 and Rs 3.462 crore in FY24. That pre-working-capital increase did not offset the Rs 5.0553 crore cash absorption from current operating balances. Continued improvement in cash conversion would depend on lower additions to inventory and receivables, higher operating liabilities, or a combination of those movements.

How much cash did inventory and receivables absorb?

Inventory and trade receivables together absorbed Rs 4.7031 crore in FY26, compared with Rs 1.6285 crore in FY25. Inventory used Rs 3.329 crore of cash in FY26, while trade receivables used Rs 1.3741 crore. Under the indirect method, an increase in either asset is treated as an operating cash outflow because funds have been committed to goods held for sale or sales that have not yet been collected.

Phychem’s March 31, 2026 balance sheet shows inventories of Rs 9.5275 crore, compared with Rs 6.1985 crore at March 31, 2025. Trade receivables rose to Rs 5.8333 crore from Rs 4.5514 crore over the same dates. The balance-sheet increases match the cash-flow statement’s inventory and receivables outflows and show that current assets increased by Rs 4.3946 crore across those two categories.

Other current liabilities used Rs 1.0896 crore of cash in FY26, reversing a Rs 70.14 lakh cash contribution in FY25. Trade payables added Rs 4.86 lakh in FY26, compared with Rs 10.79 lakh in FY25. Short-term loans and advances provided Rs 22.49 lakh, and other current assets provided Rs 46.38 lakh, but those favourable movements did not offset inventory, receivables and other-current-liability changes.

How did Phychem’s FY26 profit growth differ from operating cash flow?

Phychem’s profit increased in FY26, but the reported profit did not translate into equivalent operating cash because the two measures capture different points in the operating cycle. Profit before tax was Rs 5.5445 crore in FY26, compared with Rs 3.8155 crore in FY25, an increase of about 45%. Profit before exceptional items and tax rose to Rs 5.5445 crore from Rs 3.7805 crore, or about 47%, because FY25 included Rs 3.50 lakh of exceptional items.

Revenue from operations increased to Rs 56.4653 crore in FY26 from Rs 50.3032 crore in FY25, while total income increased to Rs 57.4809 crore from Rs 51.1133 crore. Restated profit after tax increased to Rs 4.089 crore from Rs 2.8417 crore. These income-statement measures recognise revenue and expenses during the year, whereas cash flow reflects whether related customer payments were received and whether cash was invested in inventory by March 31, 2026.

Phychem added back Rs 52.28 lakh of depreciation and amortisation and Rs 1.0058 crore of interest on borrowed funds when calculating operating profit before working-capital changes. Depreciation is a non-cash expense, while the cash-flow statement records Rs 99.81 lakh of interest and finance charges under financing activities. The resulting Rs 7.0425 crore of operating profit before working-capital changes was reduced to Rs 1.9872 crore of cash generated from operations after the current-balance movements.

What does Phychem’s funding position show?

Phychem ended FY26 with Rs 69.18 lakh of cash and cash equivalents, up from Rs 21.94 lakh at March 31, 2025, despite operating cash flow of Rs 78 lakh. The cash increase of Rs 47.24 lakh reflected Rs 32.08 lakh of net financing cash inflow and Rs 62.84 lakh of net investing cash outflow. In FY25, Phychem reported a Rs 1.8714 crore financing cash outflow and Rs 61.14 lakh of investing cash outflow.

Short-term borrowings increased to Rs 5.2267 crore at March 31, 2026, from Rs 3.193 crore a year earlier. The FY26 cash-flow statement records Rs 2.0337 crore of proceeds from short-term borrowings, while long-term borrowing repayments were Rs 71.48 lakh. Long-term borrowings declined to Rs 67.96 lakh from Rs 1.3944 crore, indicating that the balance-sheet mix moved towards short-term borrowings during the year.

Investing cash outflow was Rs 62.84 lakh in FY26, broadly similar to Rs 61.14 lakh in FY25 but below Rs 2.7854 crore in FY24. FY26 investing uses included Rs 22.52 lakh for fixed assets, Rs 18.37 lakh for net investment in deposits and Rs 26.58 lakh for capital advances. The limited operating cash flow therefore coincided with cash requirements for both working capital and investing activity.

Conclusion

Phychem’s FY26 financial statements show a clear gap between accounting profit and operating cash generation. Revenue from operations reached Rs 56.4653 crore and profit before tax reached Rs 5.5445 crore, but a Rs 5.0553 crore working-capital outflow, led by Rs 4.7031 crore absorbed by inventory and receivables, left net operating cash flow at Rs 78 lakh.

The next disclosed financial results will show whether inventories of Rs 9.5275 crore and receivables of Rs 5.8333 crore at March 31, 2026 convert into cash collections and reduced working-capital use. They will also show whether short-term borrowings, which rose to Rs 5.2267 crore, remain part of Phychem’s funding mix while operating cash flow remains below FY24 and FY25 levels.