Vishal Fabrics operating cash flow turns negative on receivables

Vishal Fabrics Limited reported net cash used in operating activities of Rs 6.08 crore for the half year ended 30 September 2026, despite standalone profit of Rs 17.67 crore, as trade receivables increased by Rs 102.21 crore. Net short-term borrowings of Rs 34.13 crore provided the main financing inflow during the period.

Why did Vishal Fabrics report negative operating cash flow?

Vishal Fabrics reported a Rs 6.08 crore net operating cash outflow for the half year ended 30 September 2026, compared with Rs 2.93 crore of operating cash generated in the year ended 31 March 2026. Operating cash flow before working-capital changes was Rs 55.05 crore in the half year, but movements in receivables, payables and other current accounts more than absorbed that amount.

The largest cash use was the Rs 102.21 crore increase in trade receivables. Trade payables contributed Rs 33.59 crore, while inventories released Rs 1.75 crore and other current assets released Rs 6.36 crore. These movements left cash generated from operations at negative Rs 5.94 crore before income tax paid of Rs 13.90 lakh took the reported operating cash outflow to Rs 6.08 crore.

The cash-flow statement uses the indirect method under Indian Accounting Standard 7, or Ind AS 7. It starts with profit before tax of Rs 22.64 crore, then adjusts for items including Rs 13.20 crore of depreciation and amortisation and Rs 19.45 crore of finance expense before recording working-capital changes.

How much did Vishal Fabrics’ receivables increase?

Vishal Fabrics’ standalone trade receivables rose to Rs 750.06 crore at 30 September 2026 from Rs 647.85 crore at 31 March 2026, an increase of Rs 102.21 crore. This balance-sheet movement matches the receivables outflow in the half-year cash-flow statement and was the largest disclosed working-capital movement.

Revenue from operations was Rs 745.41 crore for the half year ended 30 September 2026, down from Rs 830.26 crore in the corresponding half year ended 30 September 2025. Receivables therefore increased by Rs 102.21 crore while half-year revenue declined by Rs 84.85 crore year on year. The announcement does not disclose receivables ageing, customer concentration, collection terms or reasons for the increase.

Inventories fell to Rs 61.48 crore at 30 September 2026 from Rs 63.23 crore at 31 March 2026, making the Rs 1.75 crore reduction a source of cash. Other current assets declined to Rs 25.33 crore from Rs 31.68 crore, releasing Rs 6.36 crore. Those movements were smaller than the rise in receivables.

How was Vishal Fabrics financed during the half year?

Vishal Fabrics generated Rs 10.62 crore from financing activities in the half year ended 30 September 2026. Net proceeds from short-term borrowings were Rs 34.13 crore, exceeding the Rs 6.08 crore operating cash outflow and Rs 3.28 crore investing cash outflow, and resulting in a Rs 1.26 crore increase in cash and cash equivalents.

Short-term borrowings rose to Rs 230.67 crore at 30 September 2026 from Rs 196.54 crore at 31 March 2026, also an increase of Rs 34.13 crore. Non-current borrowings decreased to Rs 24.85 crore from Rs 28.91 crore after Rs 4.06 crore of long-term borrowing repayments during the half year.

Finance costs paid totalled Rs 19.45 crore in the half-year financing cash flow. The statement records no share-warrant proceeds for the half year, whereas the year ended 31 March 2026 included Rs 114.75 crore from issue of share warrants. Equity share capital remained Rs 123.81 crore at both balance-sheet dates, while other equity increased to Rs 532.01 crore from Rs 514.25 crore.

Vishal Fabrics spent Rs 4.09 crore on property, plant and equipment including capital work in progress during the half year. Capital advances and other non-current assets contributed Rs 58.09 lakh, while interest income was Rs 17.75 lakh, resulting in net cash used in investing activities of Rs 3.28 crore, against Rs 10.03 crore for the year ended 31 March 2026.

Did Vishal Fabrics remain profitable despite the cash outflow?

Vishal Fabrics remained profitable on a standalone basis, reporting Rs 17.67 crore of profit for the half year ended 30 September 2026, compared with Rs 16.89 crore in the corresponding half year ended 30 September 2025. Profit before tax was Rs 22.64 crore, marginally above Rs 22.42 crore a year earlier, while total income declined to Rs 745.67 crore from Rs 830.50 crore.

The difference between profit and operating cash flow reflected the working-capital movements recorded in the cash-flow statement rather than a reported loss. Accrual profit recognises revenue and expenses in the reported period, whereas cash flow includes changes in balances such as receivables. The Rs 102.21 crore receivables increase was larger than the Rs 17.67 crore half-year profit.

For the quarter ended 30 September 2026, standalone profit was Rs 10.63 crore, compared with Rs 7.05 crore in the quarter ended 30 June 2026 and Rs 8.01 crore in the quarter ended 30 September 2025. Quarterly revenue was Rs 366.33 crore, below Rs 379.01 crore in the preceding quarter and Rs 433.09 crore a year earlier. The filing does not provide segment disclosures or management commentary explaining the profit movement alongside lower revenue.

The standalone results were unaudited and were approved by the board on 3 November 2026. The independent auditor’s limited review, dated 3 November 2026, stated that nothing had come to its attention suggesting that the statement failed to make required disclosures or contained a material misstatement; the review provides moderate assurance and is narrower than an audit.

Conclusion

Vishal Fabrics’ half-year filing shows that reported profit and cash generation diverged: Rs 17.67 crore of standalone profit was accompanied by a Rs 6.08 crore operating cash outflow as receivables increased Rs 102.21 crore. Higher trade payables, lower inventory and Rs 34.13 crore of net short-term borrowing partly supported liquidity during the period.

The next results will show whether trade receivables reduce from Rs 750.06 crore and whether operating cash flow improves without further increases in short-term borrowings. Vishal Fabrics also said it is evaluating the financial effect of four Labour Codes that became effective on 21 November 2025, with no adjustment made because the impact was not reasonably determinable at this stage.