Sonaselection India IPO

Operating cash flows despite profits were negative ₹10.99 crore in FY26 and negative ₹14.18 crore in FY25. Working capital days rose from 122 to 134 on the back of a rise in inventory days to 150 and debtor days to 61. “Funding inventories and accounts receivable will continue to create dependency on external finance.

EBITDA margin dropped from 23.55% in FY24 to 18.39% in FY25 and 16.40% in FY26. In the same period, contribution to revenue from manufacturing activities increased from 11.28% to 81.50%. The shift will lead to additional challenges in sourcing, inventory and marketing.

Yarn and greige fabric are some of the major inputs. The top ten suppliers comprised 58.87% of the total FY26 purchases. The company does not have supplier contracts and is not used to long-term fixed-price purchase of its input. In cases where supply problems occur or input prices are high, it would lead to delays in deliveries, working capital management and margin issues if such costs are not passed to customers.

The garment industry makes up 1.20% of the FY26 revenues, and the company is not experienced in the industry. Quality, order execution and acceptance by customers become important. Also, machinery purchases are done through quotations and not through vendor agreements or orders and will result in higher expenditures for other costs like installation and freight.