An A company's first offer of its shares to the public, after which the shares are listed on a stock exchange and can be bought or sold by any investor. Read the full meaning of IPO filer, whose name is not given in the source report, showed a profit of Rs 5.335 crore for FY26, yet its operating activities ended with a cash outflow of Rs 3.183 crore. Individuals who want to know how to read a cash flow statement will find that a filing like this shows the difference between profit and cash very clearly.
| Item | Figure |
|---|---|
| Profit | Rs 5.335 crore |
| Cash generated before working capital changes | Rs 11.6537 crore |
| Inventory build, the largest use of cash | Rs 14.3162 crore, larger than the cash generated, so the operating figure moved below zero |
| Operating cash flow | Outflow of Rs 3.183 crore |
| Revenue | Rs 21.8272 crore, of which the top 10 customers accounted for 80.78% |
With such a large share of sales coming from a few buyers, the report describes collections as a cash conversion risk for company. Investors going through such a filing will see a profit in the income statement and an outflow in the cash flow statement for the same year. Money that is still to be received from customers and goods lying unsold in the warehouse, are the places where this gap will show.
Where the statement sits and how it is laid out
Every company that follows the Indian Accounting Standard (Ind AS) 7 has to publish a statement of cash flows, and the standard divides it into three parts. Investors looking for the statement will find it in the annual report of a listed company and in the filings made with the exchanges.
| Part | What it covers |
|---|---|
| Operating activities | Cash from the regular business |
| Investing activities | Money spent on or received from assets |
| Financing activities | Borrowings, repayments and similar items. Dividends paid by the company are classified here and not under operating activities. |
- Direct method: Ind AS 7 permits companies to report operating cash flow by the direct method, which lists gross receipts and payments, and it encourages this method.
- Indirect method: Finpab says Indian listed companies almost universally use this method, and the annual reports of TCS, Infosys and Reliance are included in this. The starting point is profit before tax, which Taxmann's guide says is adjusted for items that involve no cash and items that are not part of operations.
- Add-backs: Depreciation is added back to profit because it involves no cash payment, while finance costs are added back and then shown as a cash outflow under financing activities. Alongside this, the statement will show the places where that cash was actually spent.
From profit to cash: a worked trail
Angel One gives a worked example of the indirect method.
| Step | Amount |
|---|---|
| Profit before tax | Rs 500 lakh |
| Add back depreciation | Rs 80 lakh |
| Add back interest | Rs 30 lakh |
| Before any change in working capital | Rs 610 lakh |
| Receivables rising | Reduces operating cash flow by Rs 90 lakh |
| Inventory rising | Reduces operating cash flow by Rs 60 lakh |
| Higher payables | Adds Rs 40 lakh |
Money still to be received from customers and goods lying in stock take cash out of the business, and money still to be paid to suppliers keeps cash in.
The filing of Vishal Nirmiti, an IPO bound company, shows the same trail in actual numbers. As per its red herring prospectus, reported by Multibagg.ai:
- Operating cash flow for FY26 decreased to Rs 27.15 crore from Rs 38.20 crore in FY25.
- Cash before working capital changes had moved in the other direction, rising to Rs 53.35 crore from Rs 47.88 crore.
- Receivables and other current assets absorbed Rs 26.94 crore of this cash, and taxes paid took another Rs 7.75 crore.
- Even with a positive operating figure, the cash balance of company was down by Rs 5.54 crore, as investing and financing activities together used Rs 32.70 crore.
The exchange filing of each company is the document in which these figures can be matched with the names.
