Shivchem Agro plans shorter working-capital cycle with IPO

Shivchem Agro Farming Inputs plans to use Rs. 6.90 crore of IPO proceeds for working capital in FY 2026-27, while projecting net working-capital requirements of Rs. 30.09 crore. Shivchem Agro expects the funding to reduce raw-material inventory days from 259 to 107 and receivable days from 151 to 104, but also supplier-credit days from 317 to 148.

Why does Shivchem Agro need more working capital?

Shivchem Agro needs more working capital because its projected net working-capital requirement is Rs. 30.09 crore at March 31, 2027, compared with Rs. 16.63 crore at March 31, 2026. Net working capital is current assets less current liabilities, and the company uses it to fund inventory, trade receivables and day-to-day operating requirements. The projected increase is Rs. 13.46 crore despite the proposed reduction in several holding periods.

Shivchem Agro operates multiple godowns across Indian states and had a distributor network of 685 as of FY 2025-26. The company says it must keep inventory in each godown to maintain product availability for distributors. It also supplies primarily on an order-to-order basis, but holds finished goods at warehouses because its manufacturing facility is in Haryana and products must be distributed to other locations.

How will Shivchem Agro use IPO funds to shorten the working-capital cycle?

Shivchem Agro plans to allocate Rs. 6.90 crore of net IPO proceeds to working-capital requirements during FY 2026-27. The stated uses are purchases of raw materials for manufacturing, finished-goods stock at warehouses, and customer credit extended in the ordinary course of business. The company also plans to use Rs. 3.50 crore of net proceeds to repay or prepay certain loans, separate from the working-capital allocation.

The Rs. 6.90 crore is only part of the projected Rs. 30.09 crore requirement. Shivchem Agro’s funding plan identifies Rs. 21.19 crore from internal accruals and reserves, Rs. 2.00 crore from short-term borrowings and Rs. 6.90 crore from IPO funds. Internal accruals and reserves account for about 70% of projected working-capital funding, so delivery of the plan depends principally on those funds being available.

Which operating days is Shivchem Agro projecting to change?

Shivchem Agro projects shorter inventory and receivable holding periods in FY 2026-27, alongside materially faster payments to suppliers. Raw-material inventory days are expected to fall to 107 from 259 in projected FY 2025-26, finished-goods inventory days to 94 from 170, and trade receivable days to 104 from 151. The company uses 365 days in a year for these calculations.

Trade payable days are projected to fall to 148 in FY 2026-27 from 317 in projected FY 2025-26. Trade payables are amounts owed to suppliers for raw materials, packing materials, transportation and other routine purchases. Fewer payable days mean Shivchem Agro expects to rely less on extended supplier credit, reducing a source of operating finance even as lower inventory and receivable days are intended to release cash.

What caused Shivchem Agro’s receivables and inventory build-up?

Shivchem Agro reported raw-material inventory of Rs. 13.52 crore in FY 2025-26, up from Rs. 8.36 crore in FY 2024-25 and Rs. 4.03 crore in FY 2023-24. The company attributes the rise in FY 2025-26 raw-material days to higher average inventory maintained for manufacturing requirements and timely material availability. It also says advance purchases may be needed before peak demand periods and may vary with raw-material prices.

Trade receivables rose to Rs. 16.94 crore in FY 2025-26 from Rs. 11.12 crore in FY 2024-25 and Rs. 4.27 crore in FY 2023-24. Receivables were 50.08% of revenue from operations in FY 2025-26, compared with 40.47% in FY 2024-25. Shivchem Agro says distributors commonly pay after selling the full lot purchased, while competition and expansion of the distributor base can require the company to offer credit periods.

What must happen for Shivchem Agro’s FY 2026-27 plan to hold?

Shivchem Agro’s projections require raw-material inventory to decline to Rs. 11.30 crore in FY 2026-27 from Rs. 13.52 crore in FY 2025-26, even as the company projects higher business activity. The company expects raw-material inventory to equal 17.38% of revenue in FY 2026-27, below 39.99% in FY 2025-26. It attributes the expected improvement to better inventory control and the anticipated availability of IPO working-capital funds.

The plan also requires collections and supplier payments to move on schedule. Trade receivables are projected to rise in absolute terms to Rs. 20.00 crore but fall to 30.77% of revenue, while trade payables are projected to fall to Rs. 12.70 crore from Rs. 19.87 crore. Shivchem Agro says its estimates are based on internal management estimates, have not been appraised by a bank or financial institution, and may change with economic conditions, competition, market conditions and alternative financing availability.

Conclusion

Shivchem Agro’s planned Rs. 6.90 crore IPO allocation is intended to support a larger Rs. 30.09 crore working-capital base while changing how that base is financed. The company expects lower raw-material, finished-goods and receivable holding periods, but its projected reduction in trade payable days means less supplier funding will be available. The funding model consequently relies principally on Rs. 21.19 crore of internal accruals and reserves.

The next point to watch is deployment during FY 2026-27, when Shivchem Agro says it intends to use the net proceeds for the stated objects. If proceeds are not fully used in FY 2026-27 because of business, market or other commercial conditions, the company says they may be used in FY 2027-28 for future growth opportunities as determined by the board and in accordance with applicable law.