Ravita Engineering Services Growth Left Operating Cash Negative

Ravita Engineering Services Limited grew FY26 revenue to Rs 277.63 crore, but its operating cash flow remained negative at Rs 46.85 crore. Ravita Engineering Services’ cash use resulted chiefly from Rs 46.93 crore of additional trade receivables, Rs 28.24 crore of additional inventory and Rs 23.44 crore of additional short-term loans and advances.

Why was Ravita Engineering Services’ operating cash flow negative?

Ravita Engineering Services reported negative operating cash flow because its investment in working capital exceeded operating profit before working-capital changes. Working capital is cash committed to current assets, including inventory, trade receivables and advances, net of current liabilities. In FY26, operating profit before working-capital changes was Rs 40.32 crore, while the three largest current-asset movements together used Rs 98.61 crore.

The FY26 cash-flow statement, prepared under the indirect method, records a Rs 46.93 crore rise in trade receivables, a Rs 28.24 crore rise in inventories and a Rs 23.44 crore rise in short-term loans and advances. A Rs 17.81 crore increase in trade payables and a Rs 5.69 crore increase in current liabilities partly offset these uses. After Rs 9.62 crore of net income-tax expense, cash used in operating activities was Rs 46.85 crore.

The same pattern occurred in FY25 at a smaller scale. Operating profit before working-capital changes was Rs 16.42 crore, but receivables increased by Rs 22.62 crore, short-term loans and advances by Rs 9.98 crore, and inventories by Rs 7.62 crore. Operating activities used Rs 8.94 crore in FY25, compared with Rs 17.32 lakh generated in FY24.

How did revenue and profit grow while operating cash stayed negative?

Ravita Engineering Services’ revenue and profit increased in FY26 even as operating cash use widened more than five times from FY25. Revenue from engineering, procurement and construction, or EPC, and operations and maintenance, or O&M, contracts rose from Rs 108.61 crore in FY25 to Rs 277.63 crore in FY26. Profit after tax increased from Rs 11.83 crore to Rs 28.04 crore over the same period.

The divergence arises from the company’s revenue-recognition policy and the timing of cash conversion. Ravita Engineering Services recognises contract revenue when it satisfies a performance obligation; for obligations fulfilled over time, progress is measured by actual costs incurred relative to total estimated contract cost. Reported revenue can therefore precede collection, and operating cash flow will remain negative if receivables, inventory and advances expand faster than cash is received or released.

Which assets absorbed the most cash in FY26?

Trade receivables were Ravita Engineering Services’ largest identified cash absorption in FY26, rising to Rs 73.26 crore at March 31, 2026 from Rs 26.33 crore at March 31, 2025. The Rs 46.93 crore movement exceeded the FY26 increases in inventories and short-term loans and advances. The company states that receivables are normally settled on terms of 30 to 90 days and that book debts are hypothecated to bankers against its working-capital facility.

Inventories increased to Rs 37.43 crore at March 31, 2026 from Rs 9.09 crore a year earlier. Ravita Engineering Services values materials, components and stores and spares used in contracts at the lower of cost and net realisable value, using the weighted-average method for cost. Its reported inventory turnover ratio declined to 11.34 in FY26 from 18.80 in FY25, while its trade-receivables turnover ratio declined to 5.58 from 7.23.

Short-term loans and advances were Rs 33.76 crore at March 31, 2026, compared with Rs 10.34 crore at March 31, 2025. The FY26 closing balance comprised Rs 25.05 crore of advances to suppliers and Rs 8.71 crore of earnest-money deposits and security deposits. These balances represent cash paid before contract inputs, tender participation or recoveries convert them into operating cash.

How was the FY26 cash shortfall funded?

Ravita Engineering Services covered the FY26 operating cash shortfall through financing inflows, principally proceeds from a share issue. Financing activities generated Rs 51.77 crore in FY26, including Rs 56.39 crore of proceeds from issue of shares. This was partly offset by Rs 3.55 crore of net short-term-borrowing repayments, Rs 34.79 lakh of long-term-borrowing repayments and Rs 71.82 lakh of interest and finance expense paid.

The funding mix changed from FY25, when financing activities generated Rs 19.24 crore and included Rs 19.92 crore of net proceeds from short-term borrowings. Short-term borrowings were Rs 19.05 crore at March 31, 2026, down from Rs 22.60 crore at March 31, 2025, while total equity rose to Rs 99.56 crore from Rs 15.13 crore. Cash and cash equivalents increased to Rs 5.15 crore from Rs 63.66 lakh.

Ravita Engineering Services also disclosed a Rs 120 crore cash-credit facility from ICICI Bank at a floating rate of the repo rate plus 2.25 percentage points. The facility is secured against stock and current assets and supported by personal guarantees from directors and their families. The ability to finance further working-capital growth therefore depends on collections, asset values and the continued availability of the facility.

What does the balance sheet show about the working-capital commitment?

Ravita Engineering Services’ net current assets expanded to Rs 90.44 crore at March 31, 2026 from Rs 4.82 crore at March 31, 2025. Current assets increased to Rs 152.80 crore from Rs 46.75 crore, while current liabilities rose to Rs 62.35 crore from Rs 41.93 crore. The increase in net current assets was driven mainly by receivables, inventories and advances rather than cash balances.

Trade payables supplied a partial offset, increasing to Rs 32.57 crore at March 31, 2026 from Rs 14.76 crore at March 31, 2025. Ravita Engineering Services uses a 12-month operating cycle to classify current assets and liabilities. Its restated statements also say balances with debtors, creditors and advance counterparties are subject to confirmation, reconciliation and adjustment, making collections and reconciliations relevant to the eventual cash conversion of these balances.

Conclusion

Ravita Engineering Services’ FY26 statements show that a Rs 169.02 crore increase in revenue and a Rs 16.21 crore increase in profit after tax from FY25 did not translate into operating cash generation. The immediate driver was the greater cash committed to receivables, inventory and advances, which higher payables and other current liabilities did not fully offset.

The next reported period was the quarter ended June 30, 2026, when operating activities used a further Rs 11.16 crore. At June 30, 2026, trade receivables were Rs 100.56 crore, inventories were Rs 52.82 crore and short-term loans and advances were Rs 34.12 crore; collection, inventory conversion and the release of advances will determine whether the working-capital requirement persists.