Parth Electricals cash-conversion cycle stretched to 92 days

Parth Electricals & Engineering Ltd. reported a 92-day cash-conversion cycle in H1 FY27, up from 58 days in H1 FY26, as a Rs 16.67 crore working-capital outflow produced negative operating cash flow of Rs 6.45 crore despite profit after tax rising 49.2% to Rs 9.10 crore.

Why was Parth Electricals' operating cash flow negative in H1 FY27?

Parth Electricals reported negative cash flow from operating activities of Rs 6.45 crore because Rs 16.67 crore of working-capital changes and Rs 2.97 crore of taxes paid exceeded Rs 13.20 crore of operating profit before working-capital changes. In H1 FY26, working capital generated Rs 1.94 crore and operating cash flow was positive at Rs 8.95 crore.

Revenue from operations nevertheless increased 42.0% to Rs 114.19 crore in H1 FY27 from Rs 80.40 crore a year earlier, while total income rose 43.5% to Rs 116.40 crore. The comparison shows that reported revenue and profit growth did not convert into operating cash during the half year because cash was absorbed in working capital.

Parth Electricals also spent Rs 12.63 crore on property, plant and equipment, capital work in progress and advances in H1 FY27, compared with Rs 7.44 crore in H1 FY26. After Rs 0.92 crore of interest and other receipts, investing cash outflow was Rs 11.70 crore, versus Rs 6.77 crore a year earlier.

How did Parth Electricals' cash-conversion cycle reach 92 days?

Parth Electricals' cash-conversion cycle reached 92 days because receivable days rose to 94 and inventory days to 107, while payable days were 109. The cycle was 58 days in H1 FY26 and 73 days in FY26, so the H1 FY27 measure was 34 days above the comparable half-year period.

Receivable days increased by 47 days from 47 in H1 FY26, and inventory days increased by 36 days from 71. Payable days rose by 49 days from 60, partly offsetting the increase in receivables and inventories in the cash-conversion calculation.

Parth Electricals calculates receivable days against revenue from operations, and inventory and payable days against cost of materials. The presentation uses period-end balances and 183 days for half years, versus 365 days for FY26, rather than average balance-sheet amounts.

What caused Parth Electricals' working-capital build-up?

Parth Electricals said the working-capital increase was timing-driven, citing raw-material procurement in September for a major Reliance Data Centre project scheduled to run from October to December. Management also cited Rs 25.63 crore of September billing, its highest monthly billing, as collectible by 15 November.

The balance sheet recorded inventories of Rs 45.46 crore in H1 FY27, compared with Rs 22.42 crore in H1 FY26, while trade receivables increased to Rs 58.90 crore from Rs 20.77 crore. Trade payables also rose, to Rs 46.13 crore from Rs 18.86 crore, matching the increase in payable days to 109.

Cash and bank balances were Rs 37.45 crore in H1 FY27, down from Rs 71.53 crore in H1 FY26. During the period, Parth Electricals raised Rs 11.18 crore through a preferential issue of 3,00,000 equity shares and 1,00,000 warrants, with 25% paid upfront, at Rs 344 each.

Did Parth Electricals' higher profit improve margins?

Parth Electricals increased profit after tax by 49.2% to Rs 9.10 crore in H1 FY27 from Rs 6.10 crore in H1 FY26, while its profit-after-tax margin rose to 7.82% from 7.52%. Profit before tax increased 46.4% to Rs 12.05 crore, but the rise did not result in positive operating cash flow in the period.

Gross profit increased 65.6% to Rs 38.70 crore and gross margin rose 444 basis points to 33.25% from 28.81%; one basis point is one-hundredth of a percentage point. Parth Electricals attributed the margin change to a mix shift toward services and engineering, procurement and construction, or EPC, with materials falling to 66.8% of total income from 71.2%.

Earnings before interest, tax, depreciation and amortisation, including other income, increased 42.4% to Rs 14.88 crore, while its margin was 12.78% compared with 12.88% a year earlier. Sub-contracting costs rose to Rs 11.94 crore from Rs 2.61 crore, lifting other expenses to Rs 16.84 crore from Rs 5.79 crore.

What balance-sheet changes accompanied Parth Electricals' growth?

Parth Electricals' net worth increased 21% to Rs 131.74 crore in H1 FY27 from Rs 108.69 crore in H1 FY26, while short-term borrowings rose to Rs 18.74 crore from Rs 14.25 crore. The company reported no long-term debt and debt-to-equity of 0.14 times, compared with 0.13 times a year earlier.

Net fixed assets and capital work in progress together rose to Rs 51.88 crore from Rs 28.72 crore as the Vadodara gas-insulated switchgear, or GIS, plant approached completion. Capital work in progress was Rs 21.55 crore, and Parth Electricals identified commissioning that amount and converting it into revenue as an H2 FY27 priority.

The current ratio declined to 1.89 times from 2.46 times as inventories, receivables and payables increased. Annualised return on equity was 13.8% in H1 FY27 versus 11.2% in H1 FY26, while annualised return on capital employed was 18.0% versus 15.2%.

What does Parth Electricals expect in H2 FY27?

Parth Electricals expects its cash-conversion cycle to come down in H2 FY27 as Rs 25.63 crore of September billing is collected by 15 November and the Reliance Data Centre project runs through December. Management's stated focus is collecting receivables into cash and strengthening operating cash flow, without giving a numerical cash-flow target.

The company plans to inaugurate its Vadodara GIS plant and roll out 33-kilovolt GIS and ring main units in November 2026. Its disclosed milestones also include completion of the 60,000-square-foot Odisha facility in March 2027 and full operation in June 2027, with a Rs 470 crore order book and a bid pipeline above Rs 300 crore.

Conclusion

Parth Electricals paired higher revenue, gross-margin expansion and a 49.2% increase in profit after tax with a longer 92-day cash-conversion cycle. The key H1 FY27 contrast was that Rs 13.20 crore of operating profit before working-capital changes was more than offset by a Rs 16.67 crore working-capital outflow, resulting in negative operating cash flow of Rs 6.45 crore.

The next disclosed measure is whether the September Rs 25.63 crore billing was collected by 15 November and whether the October-to-December Reliance Data Centre project releases inventory and receivables in H2 FY27. Management also plans to commission Rs 21.55 crore of capital work in progress, while the GIS plant inauguration is scheduled for November 2026.