SFC Environmental’s cash cycle rose to 235 days in Fiscal 2026

SFC Environmental’s cash conversion cycle stood at 235 days in Fiscal 2026, compared with 141 days in Fiscal 2024, showing that more cash remained tied up in receivables and inventory despite an improvement from 259 days in Fiscal 2025. Standalone trade receivable days reached 282 days in Fiscal 2026.

Why did SFC Environmental’s cash conversion cycle rise to 235 days?

SFC Environmental’s 235-day cash conversion cycle in Fiscal 2026 was driven by 282 trade receivable days and 106 inventory days, partly offset by 153 trade payable days. Cash conversion cycle measures the time between paying suppliers and collecting cash from customers, calculated as receivable days plus inventory days minus payable days. The Fiscal 2026 calculation was therefore 282 plus 106 minus 153.

The position changed materially from Fiscal 2024, when SFC Environmental reported 197 receivable days, 78 inventory days and 134 payable days, resulting in a 141-day cycle. In Fiscal 2025, the cycle widened to 259 days because receivable days rose to 262 and inventory days to 106, while payable days declined to 109. Fiscal 2026 brought a 24-day reduction from Fiscal 2025, but the cycle was still 94 days longer than in Fiscal 2024.

How much did receivables contribute to SFC Environmental’s working-capital need?

SFC Environmental’s trade receivables increased to Rs 431.234 crore at March 31, 2026 from Rs 340.460 crore at March 31, 2025 and Rs 281.278 crore at March 31, 2024. The accompanying receivable-days measure rose from 197 days in Fiscal 2024 to 262 days in Fiscal 2025 and 282 days in Fiscal 2026. This rising collection period was the principal reason the cash cycle did not return to its Fiscal 2024 level.

SFC Environmental attributes the higher year-end receivable days primarily to seasonality in its wastewater treatment, or WWT, business. It says a substantial share of revenue is recognised in the fourth quarter, leaving a large portion of March 31 receivables related to recent sales. The company stated that more than 80% of receivables at each March 31 date were either not due or due for less than six months, indicating that most balances were current under its disclosed ageing definition.

Receivable days rose further to 443 days for the three months ended June 30, 2026, while trade receivables were Rs 311.943 crore. SFC Environmental says this first-quarter measure reflects lower revenue during the first half of the fiscal year and may not indicate the underlying full-year cycle. The company uses 365 divided by four to annualise the three-month period, so this figure is not directly comparable with a full-year collection pattern without that qualification.

What does the ageing profile show about collection risk?

SFC Environmental had Rs 61.042 crore of receivables more than six months old at June 30, 2026, representing 19.57% of Rs 311.943 crore of total trade receivables. The over-six-month share was 15.13% at March 31, 2026, 11.05% at March 31, 2025 and 13.30% at March 31, 2024. The June 2026 percentage therefore increased even as the absolute total receivable balance fell from the March 2026 year-end amount.

The June 30, 2026 ageing schedule shows Rs 42.893 crore of net receivables aged one to two years, Rs 5.010 crore aged two to three years and Rs 6.220 crore aged more than three years. SFC Environmental also recorded an expected credit-loss allowance of Rs 10.148 crore against the gross ageing categories at that date. Expected credit loss is the accounting allowance for receivables that may not be collected, rather than a confirmation that every balance will default.

SFC Environmental says it undertakes periodic reviews, customer follow-ups, reconciliations, internal escalations and seeks letters of credit to support collection. A letter of credit is a bank-backed payment mechanism used to reduce payment risk. The company nevertheless states that these measures may not always work and that it cannot assure collection of overdue amounts in full or on time.

How did inventory and supplier credit affect the cash cycle?

SFC Environmental’s inventory days increased from 78 days in Fiscal 2024 to 106 days in both Fiscal 2025 and Fiscal 2026. The company links the increase to greater in-house manufacturing of components and to inventories held for supplying equipment to sewage treatment plants, or STPs. Inventory days are calculated as closing inventory multiplied by 365 and divided by cost of goods sold.

Supplier credit offset part of that inventory and receivables burden in Fiscal 2026. Trade payable days increased to 153 from 109 in Fiscal 2025, reducing the cash cycle even as receivable days rose by 20 days to 282. The 44-day increase in payable days was larger than the 20-day rise in receivable days, while inventory days were unchanged at 106, explaining the fall in the reported cycle from 259 to 235 days.

SFC Environmental says it works with engineering, procurement and construction, or EPC, players from the pre-tender stage through commissioning to improve visibility of project timelines. It also says certain products are standard and interchangeable across projects, which may permit redeployment if project schedules change. Those measures depend on project timing, customer delivery acceptance and the ability to align procurement and production with actual requirements.

How reliant was SFC Environmental on working-capital borrowing?

SFC Environmental had working-capital loans of Rs 122.534 crore at March 31, 2026, equal to 95.20% of its total standalone borrowings. This was an increase from Rs 12 crore, or 61.22% of total borrowings, at March 31, 2025. At June 30, 2026, working-capital loans rose to Rs 130.912 crore and accounted for 95.74% of total borrowings.

Standalone working-capital requirements were Rs 364.315 crore in Fiscal 2026, compared with Rs 301.294 crore in Fiscal 2025 and Rs 208.447 crore in Fiscal 2024. As a percentage of revenue from operations, the requirement increased to 65.19% in Fiscal 2026 from 63.51% in Fiscal 2025 and 39.94% in Fiscal 2024. The comparison shows that the balance-sheet funding need increased over the two-year period.

For the three months ended June 30, 2026, working capital was Rs 360.205 crore, or 561.06% of revenue from operations. SFC Environmental explains that its first-half revenue is typically lower, making the percentage high in that partial-period comparison. It says that continued growth in receivables or a reduction in customer advance payments could increase the need for short-term financing.

Conclusion

SFC Environmental’s Fiscal 2026 cash conversion cycle of 235 days was lower than Fiscal 2025’s 259 days but remained above Fiscal 2024’s 141 days. The improvement came through longer supplier credit, while receivable days rose to 282 and inventory days remained at 106. Working-capital loans of Rs 122.534 crore at March 31, 2026, representing 95.20% of total borrowings, show the funding dependence accompanying that cycle.

The next test is whether SFC Environmental can deliver its disclosed Fiscal 2027 planning assumptions of 220 receivable days and 96 inventory days, compared with 282 and 106 days respectively in Fiscal 2026. The company proposes to use Rs 74.917 crore of net offer proceeds for Fiscal 2027 working-capital requirements, alongside borrowings and internal accruals. Collection timing, customer creditworthiness, inventory management and vendor credit periods will determine whether those assumptions are achieved.