The Company reported profit but negative operating cash flow

The Company reported Rs 9.58 crore of profit after tax in FY26 but recorded negative operating cash flow for the third consecutive reported year. Operations used Rs 18.47 crore of cash in FY26 after trade receivables increased by Rs 17.96 crore and inventory increased by Rs 11.42 crore.

Why did The Company report negative operating cash flow?

The Company reported negative operating cash flow because cash absorbed by working capital exceeded cash generated before working-capital movements. Working capital comprises short-term operating balances including inventory, trade receivables, trade payables and other current assets and liabilities. In FY26, operating profit before working-capital changes was Rs 15.60 crore, but cash generated from operations was negative Rs 15.93 crore and fell to negative Rs 18.47 crore after Rs 2.54 crore of income-tax payments.

The pattern occurred in all three reported periods. Net cash from operating activities was negative Rs 8.57 crore in the year ended March 31, 2024, negative Rs 17.26 crore in the period ended March 31, 2025, and negative Rs 18.47 crore in the year ended March 31, 2026. The FY26 operating cash outflow was Rs 1.21 crore higher than in the period ended March 31, 2025, while profit after tax rose from Rs 2.69 crore in the year ended March 31, 2024 to Rs 6.66 crore and then Rs 9.58 crore.

The comparison shows that reported profit and operating cash did not move together over the three periods. For operating cash flow to turn positive, collections, inventory reduction or other operating cash generation would need to offset further additions to working-capital assets. The supplied financial summary does not disclose a working-capital reduction target or timetable.

How much cash did receivables and inventory absorb in FY26?

The Company’s trade receivables and inventory absorbed Rs 29.38 crore of cash in FY26, the two largest disclosed working-capital uses. The cash-flow statement records a Rs 17.96 crore increase in trade receivables and a Rs 11.42 crore increase in inventories. Together, those movements exceeded FY26 operating profit before working-capital changes of Rs 15.60 crore by Rs 13.78 crore.

The balance sheet shows that both current-asset balances increased over the three reporting dates. Inventory rose from Rs 18.52 crore at March 31, 2024 to Rs 24.64 crore at March 31, 2025 and Rs 36.06 crore at March 31, 2026. Trade receivables increased more rapidly, from Rs 3.92 crore to Rs 17.39 crore and then Rs 36.54 crore, a Rs 32.62 crore rise over two years.

Other current assets used Rs 5.76 crore of FY26 cash, compared with Rs 1.46 crore in the period ended March 31, 2025 and Rs 65.71 lakh in the year ended March 31, 2024. A Rs 1.33 crore reduction in short-term loans and advances supplied cash in FY26, while trade payables and other current liabilities supplied Rs 68.56 lakh and Rs 1.59 crore, respectively. Those inflows did not offset the increase in receivables, inventory and other current assets.

How did The Company fund its cash requirements?

The Company generated net financing cash inflows in each reported period while operating and investing cash flows were negative. Financing activities generated Rs 20.86 crore in FY26, following Rs 23.10 crore in the period ended March 31, 2025 and Rs 9.12 crore in the year ended March 31, 2024. In FY26, the financing cash flow included Rs 45.96 crore of borrowing proceeds and Rs 3.50 crore from issue of share capital.

The FY26 financing inflow also included Rs 24.49 crore of borrowing repayments and Rs 3.20 crore of interest paid. Short-term borrowings rose from Rs 10.39 crore at March 31, 2024 to Rs 24.36 crore at March 31, 2025 and Rs 40.89 crore at March 31, 2026. Long-term borrowings rose from Rs 99.41 lakh to Rs 1.37 crore and then Rs 5.40 crore, taking total borrowings to Rs 46.29 crore at March 31, 2026.

Financing cash did not preserve the cash balance in FY26 because operating activities used Rs 18.47 crore and investing activities used Rs 5.57 crore. Fixed-asset and intangible-asset purchases accounted for Rs 3.73 crore of FY26 investing cash use, while increases in other non-current assets used Rs 1.94 crore. Cash and cash equivalents consequently fell from Rs 3.27 crore at March 31, 2025 to Rs 9.21 lakh at March 31, 2026.

What does The Company’s receivables mix show about collection exposure?

The Company reported Rs 8.34 crore of FY26 trade receivables from Avni Impex and Tex Global Inc, equal to about 22.8% of total trade receivables of Rs 36.54 crore. Avni Impex accounted for Rs 2.92 crore and Tex Global Inc accounted for Rs 5.41 crore at March 31, 2026. These balances were part of the wider trade-receivables increase that used Rs 17.96 crore of operating cash in FY26.

Avni Impex’s trade receivable balance rose from Rs 52.90 lakh at March 31, 2024 and Rs 36.46 lakh at March 31, 2025 to Rs 2.92 crore at March 31, 2026. Tex Global Inc had no disclosed trade-receivable balance at the first two reporting dates but reported Rs 5.41 crore at March 31, 2026; the related-party disclosures also record Rs 6.32 crore of FY26 sales of goods to Tex Global Inc.

The disclosures do not state whether these receivables were overdue or subject to any credit-loss provision, because the supplied summary provides balances rather than ageing data. They also record Rs 2 crore of trade advances to Avni Impex and Rs 8.37 crore of FY26 purchases from that entity. Collection timing from the two related parties therefore affects conversion of part of the Rs 36.54 crore receivables balance into cash.

Conclusion

The Company’s rising profit did not translate into operating cash generation across the three reported periods. FY26 profit after tax was Rs 9.58 crore, but receivables, inventory and other current assets absorbed Rs 35.14 crore of cash, contributing to a negative Rs 18.47 crore operating cash flow. Net financing inflows supported cash requirements as total borrowings reached Rs 46.29 crore at March 31, 2026.

The next financial statements will show whether the March 31, 2026 balances of Rs 36.54 crore in trade receivables and Rs 36.06 crore in inventory convert into cash. They will also show whether The Company continues to use borrowings or share-capital issuance to fund operating and investing cash outflows, and whether the Rs 8.34 crore in related-party receivables changes.