Pranav Constructions Limited cash use rose despite profits

Pranav Constructions Limited (PCL) reported profit after tax of Rs 71.32 crore in FY26, up from Rs 39.62 crore in FY24, but used Rs 133.80 crore in operating cash across FY25 and FY26. The cash deficit reflected substantial increases in contract assets, development rights and other operating assets that exceeded funding from payables and other liabilities.

Why did PCL cash use remain negative despite rising profits?

PCL’s reported profit rose in each of the three years, while its net cash flow from operating activities turned negative in FY25 and remained negative in FY26. Profit after tax increased from Rs 39.62 crore in FY24 to Rs 62.25 crore in FY25 and Rs 71.32 crore in FY26. Operating cash flow changed from an inflow of Rs 5.46 crore in FY24 to outflows of Rs 92.60 crore in FY25 and Rs 41.19 crore in FY26.

The difference arises because profit is measured on an accrual basis, whereas the cash-flow statement records cash movements. Under Indian Accounting Standard 7, or Ind AS 7, PCL started FY26 with profit before tax of Rs 93.94 crore and added back Rs 210.15 crore of development-rights amortisation, Rs 32.73 crore of finance costs and Rs 4.16 crore of depreciation and amortisation. These adjustments produced operating profit before working-capital changes of Rs 339.06 crore, before operating assets and liabilities reduced cash generated from operations to an outflow of Rs 28.97 crore.

PCL recognises real-estate revenue over time under Ind AS 115, using a cost-based input method that measures progress by actual project cost incurred relative to total estimated project cost, excluding land and finance costs. This method can recognise revenue before a construction-linked milestone makes payment due from a customer. The resulting contract asset is a right to consideration conditional on further performance, rather than a cash receipt or an unconditional trade receivable.

Which assets absorbed PCL’s operating cash?

PCL’s largest disclosed operating cash use was the increase in loans, other financial assets and other assets, which used Rs 476.47 crore in FY25 and Rs 730.35 crore in FY26. That FY26 use was more than twice the Rs 339.06 crore operating profit before working-capital changes. The cash-flow line combines several asset classes, but PCL’s balance-sheet notes identify contract assets recoverable and development rights as its largest project-related current assets.

Contract assets recoverable increased from Rs 77.47 crore at 31 March 2024 to Rs 246.91 crore at 31 March 2025 and Rs 513.23 crore at 31 March 2026. In FY26, PCL added Rs 407.28 crore of revenue recognised net of invoicing to contract assets and transferred Rs 141.05 crore from opening contract assets to receivables. The closing FY26 contract-asset balance was therefore more than double the FY25 amount, indicating that recognised project revenue was not yet fully billable under contractual milestones.

Development rights rose from Rs 642.73 crore at 31 March 2024 to Rs 758.00 crore at 31 March 2025 and Rs 988.50 crore at 31 March 2026. In redevelopment agreements, cooperative housing societies provide land and PCL agrees to transfer an agreed portion of constructed area, with the development rights initially recorded at fair value. PCL charged Rs 181.14 crore in FY25 and Rs 210.15 crore in FY26 as development-rights amortisation, matching the cost with revenue recognised rather than recording a new cash outflow in each year.

Did liabilities offset PCL’s asset expansion?

PCL’s supplier and customer-linked liabilities partly funded the asset build, but their increase did not offset the operating cash absorbed in FY25 or FY26. Trade payables increased by Rs 30.91 crore in FY25 and Rs 171.10 crore in FY26. Other financial liabilities, other liabilities and provisions added Rs 57.38 crore in FY25 and Rs 243.54 crore in FY26, providing a combined Rs 414.65 crore of FY26 cash support against the Rs 730.35 crore asset increase.

Unearned revenue on development rights increased from Rs 664.76 crore at 31 March 2025 to Rs 895.38 crore at 31 March 2026. This liability represents consideration for development rights that PCL had not yet recognised as revenue. Contract liabilities rose from Rs 3.06 crore to Rs 4.97 crore over the same period, while customer advances increased from Rs 15.36 crore to Rs 16.63 crore.

PCL classifies project-related assets and liabilities by the normal operating cycle of each under-construction real-estate project, rather than a uniform 12-month cycle. Its accounting policy says that project phase, approvals, complexity and the conversion of a project into cash affect that cycle. Consequently, the Rs 1,541.41 crore of other current assets at 31 March 2026 does not by itself establish when contract assets or development rights will convert into cash.

How did negative operating cash coincide with higher borrowing?

PCL’s total borrowings increased as operating cash flow was negative in FY25 and FY26. Total current and non-current borrowings rose from Rs 99.34 crore at 31 March 2024 to Rs 196.50 crore at 31 March 2025 and Rs 258.44 crore at 31 March 2026. Current borrowings represented Rs 253.44 crore of the FY26 total, while non-current borrowings were Rs 5.01 crore.

Financing activities generated Rs 94.17 crore in FY25 and Rs 24.63 crore in FY26. PCL received Rs 246.98 crore of borrowing proceeds in FY25 and Rs 225.42 crore in FY26, while repaying Rs 147.98 crore and Rs 162.95 crore, respectively. FY25 also included Rs 24.97 crore of net proceeds from an equity private placement, whereas the FY26 financing cash-flow statement reported no comparable equity-issue proceeds.

Finance costs increased from Rs 17.96 crore in FY24 to Rs 23.28 crore in FY25 and Rs 32.73 crore in FY26, including FY26 interest expense on borrowings of Rs 27.65 crore. Aggregate secured borrowings were Rs 234.84 crore at 31 March 2026, compared with Rs 152.90 crore a year earlier. PCL disclosed that project loans are secured against specified redevelopment projects’ unsold inventory and receivables, and some borrowings carry a director’s personal guarantee.

Cash and cash equivalents under the cash-flow definition declined from Rs 39.69 crore at 31 March 2025 to Rs 17.82 crore at 31 March 2026. The Rs 21.87 crore decrease in FY26 followed the Rs 41.19 crore operating outflow and a Rs 5.31 crore investing outflow, partly offset by the Rs 24.63 crore financing inflow. For operating cash to improve, recognised project revenue would need to become invoiced and collected, or liability growth would need to continue covering the expansion of operating assets.

Conclusion

PCL’s FY24 to FY26 results show that higher profit did not translate into operating cash because project-linked assets expanded faster than operating liabilities. Revenue from real-estate development increased from Rs 447.48 crore in FY24 to Rs 761.60 crore in FY26, while profit after tax rose by Rs 31.71 crore. Over FY25 and FY26, however, operating activities used Rs 133.80 crore as contract assets and development rights increased.

The disclosed next indicator is PCL’s remaining transaction price for performance obligations, which was Rs 403.62 crore at 31 March 2026 and is expected to be recognised as revenue within zero to four years. The key unresolved cash-conversion question is how much of the Rs 513.23 crore contract-asset balance becomes receivables and cash, alongside the future direction of borrowings that reached Rs 258.44 crore at 31 March 2026.