Vama Wovenfab’s working-capital need rises 72% on credit

Vama Wovenfab projects net working capital of Rs 78.79 crore for FY 2026-27, up 72% from Rs 45.79 crore in FY 2025-26. The increase stems chiefly from trade receivables projected to more than double to Rs 43.76 crore and from lower supplier credit, while inventories are estimated to decline.

Why is Vama Wovenfab’s working-capital requirement rising 72%?

Vama Wovenfab’s net working-capital requirement is estimated to increase by Rs 33.00 crore, from Rs 45.79 crore at March 31, 2026 to Rs 78.79 crore at March 31, 2027. Net working capital is the excess of current assets over current liabilities. The FY 2026-27 estimate was approved by the board on June 17, 2026 and verified by B.M. Gattani & Co., Chartered Accountants.

The projected increase results from both sides of the balance sheet. Total current assets are estimated to rise by Rs 27.83 crore to Rs 93.52 crore, while total current liabilities are projected to decrease by Rs 5.16 crore to Rs 14.73 crore. More cash tied up in operating assets and less financing from current liabilities together produce the Rs 33.00 crore increase.

The estimate depends on Vama Wovenfab’s projected collection cycle, customer payment terms and planned supplier-payment cycle. The company states that a funding shortfall for its objects of the offer would be met through internal accruals and/or unsecured loans, meaning the disclosed funding pattern can change if operating cash flows or financing differ from management estimates.

How much of Vama Wovenfab’s increase comes from receivables?

Trade receivables are the largest contributor to the rise in current assets. Vama Wovenfab projects receivables of Rs 43.76 crore at March 31, 2027, compared with Rs 18.42 crore at March 31, 2026, an increase of Rs 25.34 crore. That increase represents about 91% of the Rs 27.83 crore projected rise in total current assets.

Trade receivables are amounts due from customers for goods sold but not yet collected in cash. Vama Wovenfab estimates a receivables holding period of 67 days for FY 2026-27, compared with 31 days in FY 2025-26. The company says the FY 2025-26 level was affected by an exceptional customer recovery in March 2026 and did not reflect its normal collection pattern.

The 67-day assumption is described as a normalization based on historical collections and an anticipated change in payment terms with the existing customer base, rather than an assumption of new or larger orders requiring longer credit. For the projection to hold, customers must pay broadly in line with that 67-day cycle. A longer collection period would leave more funds in receivables than estimated.

Historical figures show that customer credit terms have materially affected the working-capital balance. Receivables rose from Rs 1.54 crore at March 31, 2024 to Rs 19.92 crore at March 31, 2025 as the holding period increased from 20 days to 94 days. Vama Wovenfab says it extended credit to support sales, while revenue from operations increased from Rs 27.87 crore in FY 2023-24 to Rs 77.45 crore in FY 2024-25.

Is inventory growth driving Vama Wovenfab’s higher working-capital need?

Inventory growth is not driving Vama Wovenfab’s projected working-capital increase. Inventories are estimated to decrease by Rs 1.63 crore, from Rs 44.78 crore at March 31, 2026 to Rs 43.15 crore at March 31, 2027. The inventory holding period is also projected to fall from 85 days to 72 days.

Inventory consists of goods held for production or sale. Vama Wovenfab says its inventory days fell from 496 in FY 2023-24 to 213 in FY 2024-25 as operations scaled up and stock moved faster. The company also attributes lower inventory needs to two automated bag machines acquired during FY 2024-25, which it says improved production efficiency.

Other current assets are projected to increase but remain substantially smaller than receivables. Short-term loans and advances are estimated to rise by Rs 3.51 crore to Rs 5.29 crore, with the holding period increasing from three days to eight days. Other current assets, principally prepaid expenses according to Vama Wovenfab, are projected to rise by Rs 0.60 crore to Rs 1.31 crore, with holding days moving from one to two.

The comparison means the FY 2026-27 requirement is principally a credit-cycle requirement rather than a stock-building requirement. Inventory is projected to be Rs 0.61 crore below projected receivables at March 31, 2027, whereas at March 31, 2026 inventories of Rs 44.78 crore exceeded receivables of Rs 18.42 crore by Rs 26.36 crore.

How does lower supplier credit increase the funding requirement?

Lower trade payables increase Vama Wovenfab’s funding requirement because suppliers are projected to provide less credit. Trade payables are estimated to decline by Rs 5.76 crore, from Rs 15.75 crore at March 31, 2026 to Rs 9.99 crore at March 31, 2027. Trade payables are amounts owed to suppliers for purchases.

Vama Wovenfab estimates that its trade-payable holding period will fall from 29 days in FY 2025-26 to 18 days in FY 2026-27. The company says accelerated creditor payments after exceptional receivable recoveries in March 2026 contributed to the 29-day level. It describes the 18-day estimate as a planned move away from extended supplier credit during its expansion phase.

The payment-cycle change is large against earlier periods. Trade payables stood at Rs 14.41 crore at March 31, 2024 and Rs 31.03 crore at March 31, 2025, while payable days were 207 and 161 respectively. Vama Wovenfab says the projected 18-day period is supported by payment terms with its top one to two suppliers and by comparable industry peers’ payment periods for other suppliers.

Other current liabilities are also estimated to decline, from Rs 1.19 crore at March 31, 2026 to Rs 0.42 crore at March 31, 2027. Short-term provisions, primarily income-tax provisions with a minor gratuity component, are projected to rise from Rs 2.94 crore to Rs 4.32 crore. The decline in payables and other liabilities exceeds the increase in provisions, contributing to the projected Rs 5.16 crore fall in total current liabilities.

How will Vama Wovenfab finance the FY 2026-27 requirement?

Vama Wovenfab plans to use Rs 26.50 crore from net offer proceeds for FY 2026-27 working-capital requirements. The remaining Rs 52.29 crore is expected to be funded through Rs 18.98 crore of short-term borrowings and Rs 33.31 crore of internal accruals. The company currently finances working capital through internal accruals and borrowings.

The planned funding mix differs from FY 2025-26. The Rs 45.79 crore requirement at March 31, 2026 was funded by Rs 23.00 crore of short-term borrowings and Rs 22.79 crore of internal accruals. For FY 2026-27, borrowings are estimated to decline by Rs 4.02 crore despite the higher requirement, while internal accruals increase by Rs 10.51 crore and offer proceeds add Rs 26.50 crore.

Vama Wovenfab has not raised bridge loans intended to be repaid from net proceeds as of the red herring prospectus date. It states that it may draw on an overdraft arrangement or cash-credit facility for additional working-capital needs until completion of the issue. Cash credit is a bank facility that permits borrowing against an approved limit for operating needs.

Care Ratings Limited has been voluntarily appointed to monitor use of the net proceeds, although the fresh issue size does not require a monitoring agency under Regulation 262 of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018. Vama Wovenfab says the proceeds will be kept in a separate bank account, and quarterly disclosures will cover deviations and category-wise variations in use.

Conclusion

Vama Wovenfab’s projected Rs 78.79 crore working-capital requirement for FY 2026-27 is primarily shaped by receivables and supplier-credit assumptions. Receivables are estimated to increase by Rs 25.34 crore to Rs 43.76 crore, while trade payables are projected to fall by Rs 5.76 crore to Rs 9.99 crore; inventories are instead expected to decline by Rs 1.63 crore.

The next disclosed point to watch is the planned deployment of net fresh offer proceeds in FY 2026-27 and the company’s quarterly reporting on use of those funds. The central operating assumptions remain unresolved until reported results show whether customer collections approach 67 days, supplier payments reach 18 days, and internal accruals provide the projected Rs 33.31 crore.