UPL net debt reaches Rs 28,684 crore on working capital

UPL Limited reported net debt of Rs 28,684 crore at Sep'26, up Rs 13,359 crore from Mar'26, as net working capital reached Rs 20,961 crore and 145 days. UPL attributed the increase chiefly to seasonal inventory financing, while H1FY27 net operating cash flow was negative Rs 9,269 crore after a larger working-capital outflow.

Why did UPL's net debt rise at Sep'26?

UPL's net debt rose because short-term borrowing increased to fund working capital while cash declined. Gross debt reached Rs 32,715 crore at Sep'26, compared with Rs 22,045 crore at Mar'26 and Rs 28,562 crore at Sep'25. Cash and cash equivalents fell to Rs 4,030 crore from Rs 6,720 crore at Mar'26, resulting in net debt of Rs 28,684 crore.

The balance-sheet movement was concentrated in short-term debt, which rose from Rs 6,511 crore at Mar'26 to Rs 21,789 crore at Sep'26. Long-term debt moved in the opposite direction, declining from Rs 15,535 crore to Rs 10,926 crore over the same period. UPL said the higher short-term debt versus Sep'25 reflected increased working-capital needs, while lower cash reflected working-capital utilisation and higher investments.

UPL's reported net-debt-to-earnings before interest, tax, depreciation and amortisation, or EBITDA, increased to 2.9 times at Sep'26 from 1.6 times at Mar'26 and 2.7 times at Sep'25. Net debt to equity rose to 0.7 times from 0.4 times at Mar'26. The presentation also reported a currency-adjusted net debt measure of Rs 26,576 crore at Sep'26 and noted that the US dollar to Indian rupee rate moved from 88.79 at Sep'25 to 95.84 at Sep'26.

How much did UPL's working capital increase?

UPL's net working capital increased Rs 5,498 crore to Rs 20,961 crore at Sep'26, while net working-capital days rose 27 days to 145. Net working capital was Rs 15,463 crore and 118 days at Sep'25. In the balance-sheet analysis, working capital was the largest change in uses of capital over that year, while fixed capital rose Rs 2,777 crore to Rs 46,429 crore.

Inventory was the largest identified contributor to the increase. Inventory rose Rs 3,972 crore to Rs 20,165 crore at Sep'26, and days inventory outstanding, or DIO, rose to 140 from 124. UPL attributed the 16-day DIO increase to lower crop-protection volumes, seasonal build-up for H2, higher input costs, shipping delays and foreign-exchange translation.

Receivables rose Rs 2,620 crore to Rs 21,642 crore, while days sales outstanding, or DSO, increased four days to 150. UPL attributed the DSO movement to tight liquidity across markets. Payables increased Rs 1,095 crore to Rs 20,846 crore, but days payables outstanding, or DPO, declined six days to 145, which UPL attributed mainly to foreign-exchange translation of payables, partly offset by lower purchases.

UPL also reported non-recourse receivables factoring of Rs 4,623 crore at Sep'26, down from Rs 4,911 crore at Sep'25. The company described this arrangement as a risk-management measure under which receivables are factored to banks on a non-recourse basis. The reduced factoring balance occurred alongside the rise in reported receivables and the four-day increase in DSO.

Is UPL's higher debt seasonal or structural?

UPL presents most of the increase in net debt between Mar'26 and Sep'26 as seasonal working-capital financing rather than structural debt. Its analysis shows net debt rising by Rs 13,359 crore over the six months, while net working capital rose from Rs 8,119 crore at Mar'26 to Rs 20,961 crore at Sep'26. UPL's working-capital trends chart says net debt rises with the H1 inventory build-up and falls as inventory is liquidated.

The structural-debt distinction is UPL's analytical measure, rather than a separate liability category in the balance sheet. UPL reported structural debt to EBITDA of 0.7 times at both Mar'26 and Sep'26, while total net debt to EBITDA increased from 1.6 times to 2.9 times. It said structural debt is broadly comparable with net debt less readily marketable inventory and secured receivables.

UPL's sources-and-uses analysis also indicates that some working capital is funded from long-term capital. At Sep'26, the company reported total working capital of Rs 20,961 crore and said about 26% was funded by long-term sources. Equity including non-controlling interests was Rs 41,418 crore, long-term debt and lease liabilities were Rs 11,929 crore, and short-term debt and lease liabilities were Rs 22,311 crore.

What does UPL's cash flow show about debt funding?

UPL recorded negative net operating cash flow of Rs 9,269 crore in H1FY27, compared with negative Rs 4,796 crore in H1FY26, because working-capital changes absorbed Rs 13,108 crore. EBITDA plus non-cash items was nearly unchanged at Rs 3,151 crore in H1FY27, versus Rs 3,153 crore a year earlier. The larger working-capital outflow, up Rs 4,578 crore year on year, therefore coincided with the decline in operating cash flow.

Free cash flow to the firm was negative Rs 11,464 crore in H1FY27, compared with negative Rs 5,566 crore in H1FY26. Investments moved from an inflow of Rs 181 crore in the prior-year half to an outflow of Rs 753 crore, while capital expenditure was Rs 753 crore against Rs 984 crore a year earlier. UPL said year-on-year cash flow was lower because of higher planned investments and a one-time tax benefit in Q2FY26.

Free cash flow to equity was negative Rs 12,600 crore in H1FY27, compared with negative Rs 6,797 crore in H1FY26. UPL's measure adjusted for seasonal changes in working capital remained positive at Rs 508 crore, but was below Rs 1,733 crore a year earlier. Net interest paid declined to Rs 1,136 crore from Rs 1,231 crore despite the rise in net debt at Sep'26.

What refinancing does UPL have to manage?

UPL disclosed proposed refinancing for its sustainability-linked loan, bonds and term loans, but the repayment table does not state the unit for the listed amounts. The table shows a term-loan repayment in FY27, bonds and a term loan in FY28, a term loan in FY29, bonds in FY31 and a sustainability-linked loan in FY32. The presentation does not provide a stated refinancing completion date.

The schedule is relevant because the borrowing mix shifted materially by Sep'26. Short-term debt rose Rs 10,436 crore from Sep'25 to Rs 21,789 crore, while long-term debt declined Rs 6,283 crore to Rs 10,926 crore. UPL's explanation of the increase depends on the planned H2 liquidation of inventory and the associated reduction in seasonal working capital.

Conclusion

UPL's Sep'26 debt increase coincided primarily with a larger working-capital requirement: net debt rose Rs 13,359 crore from Mar'26 and net working capital reached Rs 20,961 crore. Inventory, at Rs 20,165 crore and 140 days, was the largest identified driver, while negative H1FY27 operating cash flow reflected the Rs 13,108 crore working-capital outflow.

The next items to watch are the H2 inventory liquidation described in UPL's working-capital trend, movement in net working-capital days from 145, and progress on the proposed refinancing disclosed in the debt schedule. UPL also identified planned investments as a contributor to lower H1FY27 cash flow, alongside the seasonal funding requirement.