KRN FY26 operating cash flow turns negative amid working capital growth

KRN Heat Exchanger And Refrigeration Limited reported a Rs 113.80 crore operating cash outflow in financial year (FY) 2026, reversing a Rs 21.44 crore inflow in FY25, although revenue reached Rs 600.06 crore and net profit reached Rs 76.47 crore. Inventories, trade receivables and current borrowings increased sharply during FY26.

Why did KRN report negative operating cash flow in FY26?

KRN reported cash flow from operating activities of negative Rs 113.80 crore in FY26, compared with positive Rs 21.44 crore in FY25 and Rs 16.92 crore in FY24. The presentation does not provide a cash-flow reconciliation that assigns the FY26 outflow to individual line items, but its balance sheet shows substantially larger inventory and receivable balances at the FY26 reporting point.

The reversal in operating cash occurred while the income statement expanded. Revenue from operations increased by Rs 170.21 crore, from Rs 429.85 crore in FY25 to Rs 600.06 crore in FY26, while net profit rose by Rs 23.59 crore to Rs 76.47 crore. Earnings before interest, tax, depreciation and amortisation (EBITDA) increased to Rs 112.48 crore from Rs 70.51 crore, so reported profit growth did not translate into positive operating cash flow in FY26.

How much did KRN’s working capital balances change in FY26?

KRN’s inventories increased by Rs 177.06 crore during FY26, reaching Rs 272.91 crore from Rs 95.85 crore in FY25. Trade receivables increased by Rs 81.75 crore to Rs 174.71 crore from Rs 92.96 crore, meaning Rs 258.81 crore of additional balance-sheet funds were represented by those two current-asset categories before considering changes in liabilities and other assets.

KRN’s trade payables rose by Rs 102.91 crore to Rs 158.23 crore in FY26, providing a partial offset within current liabilities to the inventory and receivable increase. Other current assets were broadly stable, rising Rs 2.47 crore to Rs 85.58 crore. The presentation does not give turnover days, credit terms or an ageing profile, so it does not establish whether the receivable build-up arose from sales timing, customer credit terms or another factor.

How did KRN fund its FY26 cash requirements?

KRN generated Rs 147.69 crore from financing activities in FY26 after generating Rs 257.77 crore in FY25. Current borrowings rose to Rs 187.10 crore from Rs 32.04 crore, an increase of Rs 155.06 crore, while non-current borrowings fell from Rs 1.43 crore to Rs 0.21 crore. The reported funding increase was therefore concentrated in current rather than non-current borrowings.

Cash flow from investing activities was negative Rs 34.16 crore in FY26, compared with negative Rs 279.3 crore in FY25 and negative Rs 64.17 crore in FY24. At the same time, fixed assets rose by Rs 179.70 crore to Rs 347.17 crore in FY26 from Rs 167.47 crore in FY25. The presentation reports these figures but does not specify the assets acquired, project timing or how the fixed-asset movement reconciles with the investing cash-flow line.

The presentation labels FY26 net increase in cash and cash equivalents as negative Rs 0.28 crore, versus negative Rs 0.04 crore in FY25. Separately, its balance sheet reports cash and bank balance of Rs 46.44 crore at FY26, down from Rs 151.16 crore at FY25. As no reconciliation between the cash-flow line and the balance-sheet cash and bank balance is provided, the supplied material does not explain the difference between those reported movements.

Did KRN’s FY26 profit growth convert into operating cash?

No, KRN’s FY26 reported profit growth did not convert into positive operating cash flow. Net profit rose 44.62% to Rs 76.47 crore from Rs 52.88 crore, and EBITDA rose 59.52% to Rs 112.48 crore from Rs 70.51 crore, while cash flow from operating activities moved from an inflow of Rs 21.44 crore to an outflow of Rs 113.80 crore.

Margins showed a mixed comparison over the same period. FY26 EBITDA margin was 18.74%, up from 16.40% in FY25 but below FY24’s 18.96%, while net profit margin was 12.74%, compared with 12.30% in FY25 and 12.78% in FY24. Profit before tax (PBT) after exceptional item rose to Rs 97.96 crore in FY26 from Rs 74.32 crore, while finance costs increased to Rs 5.90 crore from Rs 3.41 crore.

What FY27 figures matter after KRN’s FY26 cash outflow?

KRN’s first half (H1) FY27 income statement shows continued growth, with revenue of Rs 571.45 crore versus Rs 267.35 crore in H1 FY26 and net profit of Rs 69.01 crore versus Rs 30.44 crore. EBITDA increased to Rs 97.81 crore from Rs 47.85 crore, although EBITDA margin was 17.12%, compared with 17.90% in the earlier half-year period.

The H1 FY27 figures do not include an updated cash-flow statement or balance sheet in the supplied pages, so they cannot show whether FY26’s operating cash outflow has reversed. Revenue in Q2 FY27 was Rs 319.14 crore, up from Rs 152.07 crore in Q2 FY26, while Q2 FY27 finance costs were Rs 3.05 crore compared with Rs 0.86 crore. That income-statement comparison makes later disclosures on cash collection, inventory and current borrowings relevant to assessing cash conversion.

Conclusion

KRN’s FY26 accounts combine substantially higher revenue, EBITDA and net profit with negative Rs 113.80 crore of operating cash flow. The simultaneous increase in inventories to Rs 272.91 crore, receivables to Rs 174.71 crore and current borrowings to Rs 187.10 crore shows the scale of the cash and funding demands recorded on the balance sheet, while higher trade payables partly offset those movements.

The unresolved matter is whether the working-capital build and reliance on current borrowings will moderate as revenue continues to grow. KRN has reported H1 FY27 revenue of Rs 571.45 crore and net profit of Rs 69.01 crore, but the supplied presentation gives no H1 FY27 cash-flow or balance-sheet update and no stated working-capital target. The next relevant disclosure will be one that reports operating cash flow alongside inventory, receivables, payables and borrowings.