V2 cash flow falls to Rs 18 crore as cycle hits 88 days

V2 Retail reported Rs 18 crore of net cash from operating activities in H1FY27, down from Rs 109.8 crore in H1FY26, as its net working-capital cycle reached 88 days from 45 days. Changes in working capital used Rs 261.4 crore, offsetting most of Rs 279.3 crore of operating profit before working-capital changes.

Why did V2’s working-capital cycle reach 88 days?

V2’s net working-capital cycle reached 88 days in H1FY27 because inventory days increased while creditor days declined year on year. Inventory represented 146 days of sales, compared with 124 days in H1FY26, an increase of 22 days. Creditor days, which measure the period of supplier credit reported in the operating data, fell by 22 days to 58 days from 80 days. Together, those movements increased net working-capital days by 43 days from 45 days.

The H1FY27 cycle was also above the 81 days reported for FY26 and the 45 days reported for FY25. Inventory days were 136 in FY26 and 108 in FY25, while creditor days were 55 and 63 respectively. Compared with FY26, the H1FY27 increase in the net working-capital cycle reflected a 10-day rise in inventory days, partly offset by creditor days being three days higher.

How did working capital affect V2’s H1FY27 cash generation?

V2 generated Rs 18 crore of cash from operations in H1FY27 because working-capital changes used Rs 261.4 crore against operating profit before working-capital changes of Rs 279.3 crore. In H1FY26, operating profit before working-capital changes was Rs 188.8 crore and working-capital changes used Rs 79 crore, leaving Rs 109.8 crore of cash generated from operations. Net cash from operating activities remained Rs 18 crore in H1FY27 because the presentation reported no direct taxes paid, net of refunds, for the period.

Cash generated from operations declined by Rs 91.8 crore year on year even as operating profit before working-capital changes increased by Rs 90.5 crore. The cash use from working-capital changes increased by Rs 182.4 crore between the two half years. In FY26, working-capital changes used Rs 549.3 crore, contributing to cash generated from operations of negative Rs 50.7 crore and net cash from operating activities of negative Rs 103.4 crore after Rs 52.7 crore of direct taxes.

What changed in V2’s inventory and funding position?

V2’s consolidated inventories increased to Rs 1,447.8 crore at H1FY27 from Rs 1,141.8 crore at FY26, an increase of Rs 306 crore that coincided with the higher inventory-days measure. Total inventory density was Rs 3,125 per square foot in H1FY27, compared with Rs 2,885 in H1FY26. Store inventory density rose to Rs 1,978 per square foot from Rs 1,855, while distribution-centre inventory density increased to Rs 1,147 from Rs 1,030.

V2 reported current borrowings of Rs 483.3 crore at H1FY27, compared with Rs 229.8 crore at FY26, while trade payables increased to Rs 573 crore from Rs 463.3 crore. Non-current borrowings were Rs 45.6 crore at H1FY27 versus Rs 24.1 crore at FY26. Cash and cash equivalents closed at Rs 8.4 crore, compared with Rs 5.9 crore at FY26 and Rs 14.3 crore at H1FY26.

Net cash from financing activities was Rs 135.3 crore in H1FY27, compared with an outflow of Rs 27.2 crore in H1FY26. Net cash used in investing activities was Rs 150.9 crore, versus Rs 77.2 crore a year earlier. The combination left a net increase of Rs 2.4 crore in cash and cash equivalents during H1FY27, compared with an increase of Rs 5.3 crore in H1FY26.

Did V2’s reported earnings rise despite the cash-flow decline?

V2’s reported earnings increased in H1FY27 despite the decline in operating cash generation. Revenue rose 42% to Rs 1,902.8 crore, gross profit increased 47% to Rs 566.4 crore, and profit after tax rose 43% to Rs 60.1 crore. Gross-profit margin increased to 29.8% from 28.7%, while earnings before interest, tax, depreciation and amortisation increased 50% to Rs 259.7 crore and its margin rose to 13.6% from 12.9%.

The Q2FY27 comparison showed a smaller increase in profit after tax than in revenue and earnings before interest, tax, depreciation and amortisation. Revenue increased 28% to Rs 905.6 crore and earnings before interest, tax, depreciation and amortisation increased 41% to Rs 120.3 crore, while profit after tax rose 6% to Rs 18.2 crore. The profit-after-tax margin was 2.0%, compared with 2.4% in Q2FY26, as depreciation and amortisation rose to Rs 68.3 crore from Rs 37.6 crore and finance cost increased to Rs 29.7 crore from Rs 28 crore.

V2 ended H1FY27 with 427 stores after opening 106 and closing four during the half year, with retail area of about 46.3 lakh square feet. H1FY27 volume growth was 43%, but same-store sales growth was about negative 3.7% and monthly sales per square foot declined to Rs 785 from Rs 948 in H1FY26. These measures provide the operating context for rising inventory and revenue during the store expansion period.

Conclusion

V2’s H1FY27 figures show that reported profit growth did not translate into comparable operating cash generation. Revenue increased by Rs 561.9 crore and profit after tax by Rs 18.2 crore from H1FY26, but the rise in inventory days and fall in creditor days lifted the net working-capital cycle to 88 days. Working-capital changes therefore used Rs 261.4 crore, leaving Rs 18 crore of operating cash flow.

The unresolved matter in subsequent disclosures is whether inventory days, creditor days and the resulting working-capital cycle change from the H1FY27 level of 88 days, compared with 81 days in FY26. The presentation also provides operational measures to track alongside this cycle: the 427-store base, 106 H1FY27 store openings, monthly sales per square foot of Rs 785 and inventories of Rs 1,447.8 crore.