SJP Ultrasonics Limited's operating cash flow stayed negative

SJP Ultrasonics Limited reported negative operating cash flow in FY2025 and FY2026 despite profit after tax rising to Rs 5.24 crore in FY2026. Operating activities used Rs 2.88 crore in FY2025 and Rs 2.70 crore in FY2026, as trade receivables and inventories absorbed cash from the expanding business.

Why did SJP Ultrasonics' operating cash flow stay negative?

SJP Ultrasonics' operating cash flow stayed negative because working capital absorbed more cash than the business generated through its ordinary operations. Net cash from operating activities was negative Rs 2.88 crore in FY2025 and negative Rs 2.70 crore in FY2026, compared with a positive Rs 14.94 lakh in FY2024.

Management attributed the FY2025 operating outflow primarily to increased trade receivables, meaning revenue had been recognised before cash was collected. It attributed the FY2026 outflow primarily to increased inventories, which held cash in stock. Positive operating cash generation would therefore depend on collection of receivables and conversion of inventory into delivered machinery and customer receipts, rather than on additional recorded sales alone.

The cash-flow pattern differed from reported profitability across all three financial years. Profit after tax rose from Rs 3.40 crore in FY2024 to Rs 4.17 crore in FY2025 and Rs 5.24 crore in FY2026. That divergence illustrates the effect of working capital, which represents funds tied up in short-term operating assets such as receivables and inventory after current liabilities are considered.

How did receivables and inventory change as sales grew?

SJP Ultrasonics converted credit sales into cash more slowly over the reported period, based on its declining trade receivables turnover ratio. The ratio, calculated as net credit sales divided by average accounts receivable, declined from 4.22 times in FY2024 to 2.69 times in FY2025 and 2.48 times in FY2026.

Revenue from operations rose 38.44% to Rs 21.06 crore in FY2025 and another 26.12% to Rs 26.56 crore in FY2026. Average accounts receivable increased from Rs 3.61 crore in FY2024 to Rs 7.84 crore in FY2025 and Rs 10.70 crore in FY2026. The FY2025 increase is consistent with management's statement that a significant part of recognised revenue had not yet been realised in cash.

Inventory turnover also declined, from 2.21 times in FY2024 to 2.17 times in FY2025 and 1.96 times in FY2026. Average inventory rose from Rs 6.87 crore to Rs 9.70 crore and then Rs 13.52 crore over the same period. Net capital turnover, calculated as net sales divided by average working capital, fell from 3.12 times in FY2024 to 1.95 times in FY2025 and 1.61 times in FY2026.

What caused SJP Ultrasonics' inventory build-up?

SJP Ultrasonics said the inventory build-up reflected machinery that had been manufactured but could not be delivered pending customer trials, samples and approvals. Finished goods and work-in-progress, meaning machinery still under manufacture, increased from Rs 7.02 crore at the start of FY2026 to Rs 9.69 crore at March 31, 2026.

The FY2026 stock increase of Rs 2.67 crore was recorded as a negative Rs 2.67 crore change in inventories expense line. In FY2025, finished goods and work-in-progress increased from Rs 6.48 crore at the beginning of the year to Rs 7.02 crore at year-end, producing a negative Rs 53.92 lakh inventory-change line. Management linked the undelivered machinery in both years to its plastic joining solutions and industrial automation segments.

The inventory position coincided with higher purchases and material consumption in FY2026. Cost of materials consumed increased 61.60% to Rs 9.18 crore, while purchases of stock-in-trade increased 54.36% to Rs 3.69 crore, which management attributed to increased customer orders for ultrasonic welding machines. The cash tied up in stock would continue if deliveries remained subject to pending trials and approvals.

Did rising profit remove SJP Ultrasonics' cash requirement?

SJP Ultrasonics' rising profit did not remove its operating cash requirement in FY2025 or FY2026. Profit after tax increased 22.65% in FY2025 and 25.65% in FY2026, but net cash from operating activities remained negative in both years because receivables and inventory increased.

The net profit ratio declined from 22.37% in FY2024 to 19.81% in FY2025 and 19.74% in FY2026. Earnings before interest, tax, depreciation and amortisation, or EBITDA, rose from Rs 5.42 crore in FY2024 to Rs 6.84 crore in FY2025 and Rs 8.24 crore in FY2026, while EBITDA margin declined from 35.60% to 32.47% and 31.02%.

Revenue from operations represented 99.71% of total revenue in FY2026, with other income of Rs 7.70 lakh against total revenue of Rs 26.63 crore. The operating cash-flow issue therefore arose principally within the core business. For profit to translate into cash, receivable collections and inventory conversion would need to improve relative to sales growth.

How was SJP Ultrasonics funding the operating cash shortfall?

SJP Ultrasonics reported positive financing cash flows of Rs 3.42 crore in FY2025 and Rs 2.48 crore in FY2026 while operating cash flow was negative. The company attributed FY2026 financing cash to increased short-term borrowings; it attributed FY2025 financing cash to promoter share-capital infusion and increased long-term borrowings.

Total borrowings were Rs 5.78 crore at March 31, 2026, comprising Rs 5.68 crore of short-term borrowings and Rs 10.45 lakh of long-term borrowings. Total debt was Rs 2.42 crore at March 31, 2025, and the debt-equity ratio increased to 0.29 times from 0.16 times. As of September 10, 2026, secured loans outstanding were Rs 5.77 crore, including Rs 5.63 crore from Saraswat Bank.

The Saraswat Bank facility was sanctioned in June 2026 for Rs 5.78 crore and had a 12-month tenure subject to its limit-expiry date. Its security included existing and future receivables, current assets, movable assets and immovable fixed assets, alongside personal guarantees from Jignesh Parekh and Rupal Parekh. This means a significant part of the company's funding was secured against asset categories that management said were absorbing cash.

Conclusion

SJP Ultrasonics increased revenue from operations from Rs 15.21 crore in FY2024 to Rs 26.56 crore in FY2026, while profit after tax increased by Rs 1.84 crore over the same period. However, operating cash flow moved from a Rs 14.94 lakh inflow in FY2024 to two consecutive outflows, reflecting higher receivables, rising inventory and lower turnover ratios.

The disclosed matters to watch are whether pending trials, samples and approvals allow machinery to be delivered, and whether cash collections catch up with credit revenue. SJP Ultrasonics stated that there had been no significant material developments after its FY2026 audited accounts, while its June 2026 Saraswat Bank working-capital facility has a 12-month tenure and is secured partly by receivables and current assets.