Vinod Texworld’s FY25 profit rise did not generate cash

Vinod Texworld Limited reported profit after tax of Rs 9.21 crore in FY25, up from Rs 5.30 crore in FY24, but used Rs 11.85 crore in operating activities. The cash deficit arose as inventories absorbed Rs 14.76 crore and trade receivables absorbed Rs 10.88 crore during FY25.

Why did Vinod Texworld’s FY25 profit rise not generate cash?

Vinod Texworld’s FY25 profit rise did not generate cash because working-capital outflows exceeded cash generated before changes in working capital. Working capital is cash tied up in short-term operating assets and liabilities. Profit before tax rose to Rs 12.37 crore in FY25 from Rs 7.08 crore in FY24, while operating profit before working-capital changes increased to Rs 21.54 crore from Rs 12.69 crore.

Vinod Texworld recorded cash generated from operations of negative Rs 9.91 crore before direct taxes in FY25, followed by Rs 1.93 crore of direct tax paid. Net cash used in operating activities was therefore Rs 11.85 crore in FY25, compared with Rs 6.68 crore in FY24 and Rs 5.86 crore in FY23. The company reported positive profit after tax in all three years, but no positive operating cash flow in the three reported periods.

The separation between profit and cash reflects the indirect cash-flow method prescribed by Accounting Standard 3, or AS-3, on cash-flow statements. Vinod Texworld starts with profit before tax and adds non-cash charges including Rs 3.88 crore of depreciation and Rs 5.27 crore of interest and finance cost for FY25 before recording changes in operating assets and liabilities.

Which working-capital items absorbed Vinod Texworld’s cash in FY25?

Vinod Texworld’s inventory and customer receivables were its largest FY25 cash absorbers. Inventories consumed Rs 14.76 crore in FY25, following Rs 23.63 crore in FY24 and Rs 5.19 crore in FY23. Trade receivables, which are amounts due from customers for goods sold, consumed Rs 10.88 crore in FY25 after absorbing Rs 11.16 crore and Rs 19.80 crore in the preceding two years.

Balance-sheet amounts show that both categories rose over the three years ended March 31, 2025. Inventories increased to Rs 60.33 crore from Rs 45.56 crore at March 31, 2024, while trade receivables rose to Rs 87.37 crore from Rs 74.69 crore. Their combined Rs 147.70 crore represented most of Vinod Texworld’s Rs 153.00 crore current assets at March 31, 2025.

Other working-capital movements added to the FY25 cash requirement. Trade payables used Rs 2.22 crore in FY25, compared with cash inflows of Rs 16.51 crore in FY24 and Rs 12.66 crore in FY23. Other current liabilities used Rs 5.05 crore in FY25, whereas they provided Rs 0.70 crore in FY24; short-term loans and advances provided Rs 0.88 crore in FY25.

How did Vinod Texworld fund its operating cash deficit?

Vinod Texworld funded its FY25 operating and investing cash outflows mainly through financing inflows, led by short-term borrowings. Net cash from financing activities was Rs 14.00 crore in FY25, compared with Rs 10.51 crore in FY24 and Rs 13.80 crore in FY23. The FY25 financing inflow exceeded the combined Rs 13.93 crore used in operating and investing activities.

Short-term borrowings increased by Rs 21.26 crore in FY25, after increases of Rs 11.90 crore in FY24 and Rs 12.11 crore in FY23. The balance of short-term borrowings reached Rs 48.80 crore at March 31, 2025, from Rs 27.54 crore a year earlier and Rs 15.64 crore at March 31, 2023. In contrast, long-term borrowings fell by Rs 1.99 crore in FY25 to Rs 17.48 crore.

Finance costs rose alongside the higher short-term borrowing balance. Vinod Texworld reported finance costs of Rs 5.27 crore in FY25, compared with Rs 2.62 crore in FY24 and Rs 1.31 crore in FY23. The cash-flow statement records the Rs 5.27 crore interest and finance cost as a financing outflow, while the profit-and-loss statement records it in arriving at profit before tax.

Did Vinod Texworld’s earnings growth outpace operating cash generation?

Vinod Texworld’s earnings growth outpaced operating cash generation because revenue and profit rose while operating cash remained negative. Revenue from operations increased to Rs 335.37 crore in FY25 from Rs 271.49 crore in FY24 and Rs 200.67 crore in FY23. Profit after tax increased to Rs 9.21 crore from Rs 5.30 crore and Rs 0.68 crore over the same periods.

The contrast widened in FY25. Profit before tax was Rs 12.37 crore, but net cash used in operating activities was Rs 11.85 crore; in FY24, profit before tax was Rs 7.08 crore and operating cash use was Rs 6.68 crore. FY23 reported profit before tax of Rs 0.93 crore and operating cash use of Rs 5.86 crore.

Vinod Texworld’s accounting policy recognises sales revenue when goods are delivered, title has passed, revenue can be measured reliably and collection is probable. This means reported revenue can precede cash collection, consistent with the FY25 rise in trade receivables to Rs 87.37 crore. Operating cash would depend on collections, inventory movement and supplier-credit movements producing more cash than they consume.

What do Vinod Texworld’s reported cash balances show?

Vinod Texworld’s restated statements present two different FY25 cash-and-cash-equivalent amounts. The March 31, 2025 balance sheet reports Rs 2.14 crore, compared with Rs 13.94 lakh at March 31, 2024. The cash-flow statement’s reconciliation reports Rs 21.04 lakh at the end of FY25, comprising Rs 15.77 lakh in fixed deposits, Rs 5.16 lakh cash on hand and Rs 0.11 lakh in a current account.

The cash-flow statement reports a FY25 net increase of Rs 7.12 lakh from an opening cash-and-cash-equivalent balance of Rs 13.93 lakh. The supplied restated financial information does not explain the difference between its Rs 2.14 crore balance-sheet figure and Rs 21.04 lakh cash-flow reconciliation figure. The documents state that the restated information was compiled from audited financial statements for FY23 through FY25 for the proposed initial public offering.

Conclusion

Vinod Texworld’s FY25 accounts show that higher revenue and profit were accompanied by a larger operating cash deficit. Revenue rose by Rs 63.88 crore and profit after tax increased by Rs 3.91 crore from FY24, but working-capital changes contributed to Rs 11.85 crore of cash used in operations. Financing inflows of Rs 14.00 crore, including a Rs 21.26 crore increase in short-term borrowings, funded the operating and investing cash requirements.

The next reported period should show whether inventories of Rs 60.33 crore and trade receivables of Rs 87.37 crore turn into cash collections and lower working-capital use. It should also show whether short-term borrowings of Rs 48.80 crore at March 31, 2025 remain the main funding source and whether the two FY25 cash-balance disclosures are reconciled.