Vectras Enprocon projects a rising FY28 working-capital need

Vectras Enprocon projects a working-capital requirement of Rs 109.9319 crore as at March 31, 2028, up from Rs 55.5834 crore as at March 31, 2026. The increase reflects higher inventories, trade and retention receivables, and fixed deposits pledged to support banking facilities for its oil and gas engineering, procurement and construction activities.

How quickly is Vectras Enprocon’s working-capital requirement rising?

Vectras Enprocon projects its working-capital requirement to increase by Rs 54.3485 crore between March 31, 2026 and March 31, 2028. Working capital, as used in the company’s estimate, is total current assets less total current liabilities. The requirement rose from Rs 12.9063 crore at March 31, 2024 to Rs 28.7289 crore at March 31, 2025 and Rs 55.5834 crore at March 31, 2026.

The restated requirement was Rs 71.1942 crore for the six months ended September 30, 2026, calculated from Rs 82.9434 crore of current assets and Rs 11.7492 crore of current liabilities. For March 31, 2028, Vectras Enprocon projects Rs 125.3832 crore of current assets and Rs 15.4513 crore of current liabilities. The Board approved the estimates for fiscal 2027 and fiscal 2028 on October 26, 2026, and they have not been appraised by a bank or financial institution.

The projected increase is not solely a function of revenue growth because Vectras Enprocon’s engineering, procurement and construction, or EPC, projects can run from six months to 36 months or longer. The company must procure materials and execute projects before collecting all contractual payments, while its estimate assumes that supplier credit will reduce to 20 days in fiscal 2027 and 17 days in fiscal 2028 from 28 days in fiscal 2026.

What is locking cash into Vectras Enprocon’s EPC projects?

Inventory is projected to remain the largest component of Vectras Enprocon’s working-capital requirement, reaching Rs 50.9394 crore at March 31, 2028 from Rs 34.7923 crore at March 31, 2026. Inventory includes materials and work in progress for EPC contracts. The company says high-value, customised and long-lead materials must be ordered in advance to avoid delays in erection and commissioning.

Inventory holding is projected to decline to 112 days in fiscal 2027 and 97 days in fiscal 2028 from 116 days in fiscal 2026, but the inventory balance rises as the company estimates higher activity. Inventory days were 177 for the six months ended September 30, 2026, compared with 25 days in fiscal 2024, when inventory and work in progress were lower.

Retention receivables also defer cash collection because customers retain 5% to 10% of invoice value until completion of contractual obligations or, where applicable, the end of the defect liability period. Vectras Enprocon states that the defect liability period is generally eight to 12 months after project handover. It projects retention receivables of Rs 22.6805 crore at March 31, 2028, compared with Rs 8.5305 crore at March 31, 2026.

Trade receivables are projected to rise to Rs 39.7000 crore at March 31, 2028 from Rs 21.1597 crore at March 31, 2026. Vectras Enprocon generally extends 30 to 45 days of credit, while third-party audits may take another 20 to 50 days. The projection assumes receivable days of 57 in fiscal 2028, compared with 60 days in fiscal 2026 and 49 days in the six months ended September 30, 2026.

Why do bank guarantees increase Vectras Enprocon’s capital need?

Bank guarantees increase Vectras Enprocon’s funding requirement because tender participation and project execution require non-fund-based banking limits and, in some cases, lien-marked deposits. As at September 30, 2026, the company had submitted bids for four projects with an aggregate value of Rs 297.8165 crore. Earnest money deposits, or EMDs, are typically about 1% of bid value and are generally lien-marked for six to eight months.

Vectras Enprocon currently receives a start-up-related exemption from providing EMDs in most public-sector undertaking contracts, but says that exemption will not be available as the company grows. The company identifies the expected loss of this exemption as a reason for higher working-capital needs in the next fiscal year. This assumption must hold alongside the company’s expectation of participating in several tenders while executing existing projects.

Following contract award, contractual performance bank guarantees generally range from 2.5% to 5% of contract value, while performance bank guarantees generally range from 5% to 10%. Vectras Enprocon states that average project execution takes more than 12 months and up to 36 months, causing related funds to remain blocked for about 15 to 40 months, including the post-completion release period.

Fixed deposits lien-marked for fund-based and non-fund-based limits are projected to rise to Rs 8.3237 crore at March 31, 2028 from Rs 1.6514 crore at March 31, 2026 and Rs 4.3995 crore at September 30, 2026. The projected deposits are intended to support EMDs and performance guarantees, with maturities expected to range from three months to more than one year.

How does Vectras Enprocon plan to fund the projected requirement?

Vectras Enprocon plans to fund Rs 20 crore of its long-term working-capital requirement from net proceeds and the balance from internal accruals. The proposed use is Rs 8 crore in fiscal 2027 and Rs 12 crore in fiscal 2028. The fiscal 2028 projection therefore depends on internal accruals supplying Rs 89.9319 crore of the projected Rs 109.9319 crore requirement.

As at September 30, 2026, Vectras Enprocon had sanctioned working-capital facilities of Rs 56.0906 crore, comprising Rs 32.5906 crore of fund-based limits and Rs 23.50 crore of non-fund-based limits. Outstanding working-capital facilities from HDFC Bank Limited and Yes Bank Limited, including bill-discounting facilities, totalled Rs 29.1469 crore on that date.

HDFC Bank Limited’s fund-based facility had a sanctioned limit of Rs 22.6406 crore at September 30, 2026, of which Rs 19.5504 crore, or 86.35%, was utilised. Its non-fund-based limit was Rs 23.50 crore, of which Rs 7.1269 crore, or 30.33%, was utilised. These facilities serve different purposes because fund-based limits provide financing while non-fund-based limits support guarantees.

The proposed use of proceeds also includes Rs 14 crore for repayment or prepayment of certain borrowings. Total outstanding fund-based borrowings were Rs 31.3612 crore at September 30, 2026. The identified HDFC Bank Limited cash-credit facility had Rs 15.9098 crore of principal outstanding against a sanctioned amount of Rs 19 crore, with a stated interest rate of 8.50% a year.

Conclusion

Vectras Enprocon’s Rs 109.9319 crore projection for March 31, 2028 reflects the cash demands of longer-cycle EPC work: inventory is procured before execution, customer payments are subject to audit and retention terms, and guarantees require banking limits or pledged deposits. The projected increase from Rs 55.5834 crore at March 31, 2026 also assumes less supplier credit, with trade-payable days falling to 17 by fiscal 2028.

The next measure to watch is deployment of the planned Rs 20 crore of net proceeds, including Rs 8 crore in fiscal 2027 and Rs 12 crore in fiscal 2028. Vectras Enprocon says a shortfall in proceeds or an increase in actual requirements would be funded from internal accruals or other available means, while CARE Ratings Limited has been appointed to monitor utilisation of net proceeds.