Sangameshwar Coffee Estates Limited Annual Report and Financials

Sangameshwar Coffee Estates Limited Standalone Balance Sheet (Rs in Crores)

Sangameshwar Coffee Estates Limited Standalone Profit & Loss Statement (Rs in Crores)

Sangameshwar Coffee Estates Limited Standalone Cash Flow Statement (Rs in Crores)

Summary of the Cash Flow Statement for the years 2026 and 2025:

Cash Flow from Operating Activities

The company’s operating cash flow remained negative in both years, indicating that the core business operations were not generating sufficient cash. Net cash used in operating activities increased from Rs 3.13 crore in 2025 to Rs 1.41 crore in 2026, showing an improvement of Rs 1.72 crore, although the figure remained negative. Profit before tax declined from Rs 4.12 crore to Rs 2.47 crore, reflecting weaker accounting profitability. After adjusting for non-cash and non-operating items such as interest income, dividend income, interest expenses and depreciation, operating profit before working capital changes was Rs 3.71 crore in 2026, compared with Rs 3.80 crore in 2025. The major pressure came from working capital, particularly inventories, where the cash outflow increased substantially from Rs 4.24 crore to Rs 9.86 crore. This suggests that a significant amount of cash was tied up in inventory. On the positive side, other liabilities generated Rs 3.66 crore of cash and trade receivables contributed Rs 0.66 crore. Overall, operating cash flow improved compared with the previous year, but the continued negative figure indicates that the company needs better working-capital management.

Cash Flow from Investing Activities

Investing activities showed a significant shift from a cash inflow of Rs 5.41 crore in 2025 to a cash outflow of Rs 8.26 crore in 2026. The principal reason was the purchase of non-current investments amounting to Rs 7.26 crore, along with Rs 1.98 crore spent on PPE and intangible assets. This indicates that the company deployed substantial cash toward long-term investments and assets during 2026. In contrast, 2025 benefited from realisation of non-current investments of Rs 0.65 crore, current investments of Rs 0.31 crore, and long-term loans realised of Rs 2.58 crore. Interest received remained significant at Rs 0.91 crore in 2026, although it declined from Rs 1.90 crore in 2025. Thus, the negative investing cash flow in 2026 is largely attributable to investment and asset acquisition rather than an inability to generate investment-related income. However, such large investment outflows increased pressure on the company 's overall liquidity.

Cash Flow from Financing Activities

Financing activities generated a net cash inflow of Rs 0.53 crore in 2026, compared with Rs 3.65 crore in 2025. The company raised Rs 3.36 crore through short-term borrowings, which provided liquidity to partly compensate for the negative operating and investing cash flows. At the same time, the company repaid Rs 0.40 crore of long-term borrowings and paid Rs 1.91 crore as interest, indicating a continuing debt-servicing burden. The company also paid a dividend of Rs 0.50 crore during 2026, whereas no dividend was paid in 2025. Although short-term borrowing supported cash flows, the reduction in net financing inflow suggests that the company had less financing support than in the previous year. The increased dependence on short-term borrowings is also noteworthy because it can create additional liquidity and refinancing pressure if operating cash generation does not improve.

Net Increase/(Decrease) in Cash and Cash Equivalents

The company experienced a substantial decrease in cash and cash equivalents of Rs 9.14 crore in 2026, compared with an increase of Rs 5.94 crore in 2025. The major reason was the combination of negative operating cash flow of Rs 1.41 crore and heavy investing cash outflow of Rs 8.26 crore. Financing activities generated only Rs 0.53 crore, which was insufficient to offset these outflows. Consequently, cash and cash equivalents declined from approximately Rs 22.68 crore at the beginning of 2026 to Rs 13.53 crore at the end of the year. Although the company still maintained a reasonable absolute cash balance, the sharp year-on-year decline of around Rs 9.14 crore indicates a considerable weakening of short-term liquidity.

Financial ratios of Sangameshwar Coffee Estates Limited

Summary of Financial Ratios for the year 2026 and 2025:

Current Ratio

The current ratio declined from 1.80 in 2025 to 1.44 in 2026, indicating a weakening in the company’s short-term liquidity position. Although the ratio remains above 1, suggesting that current assets are still higher than current liabilities, the decline means the company has a relatively smaller cushion for meeting its short-term obligations. This is consistent with the cash flow statement, which showed negative operating cash flow and a significant reduction in cash balances. The company should therefore focus on improving working-capital management, particularly inventory and cash conversion.

Debt-Equity Ratio

The debt-equity ratio increased marginally from 0.78 to 0.79, indicating that the company 's financial leverage remained broadly stable. The small increase suggests a slightly higher dependence on borrowed funds relative to shareholders ' funds. While the change is not significant, the company should monitor its borrowings because its operating cash flow is negative and it has incurred substantial interest expenses. Overall, the capital structure has remained relatively stable between the two years.

Debt Service Coverage Ratio

The debt service coverage ratio declined sharply from 3.89 in 2025 to 2.03 in 2026. This indicates that the company’s ability to service its debt obligations from internally generated earnings has weakened considerably. Although a ratio above 1 generally indicates that the company is generating sufficient earnings to cover debt-servicing requirements, the substantial decline is a warning sign. The fall is consistent with the reduction in profitability and higher pressure from interest expenses. The company needs to improve earnings and operating cash generation to strengthen its debt-servicing capacity.

Return on Equity

The return on equity (ROE) decreased from 11.16% in 2025 to 6.35% in 2026, showing a significant decline in the returns generated for shareholders. This means that the company generated substantially less profit in relation to shareholders’ funds during 2026. The decline can primarily be associated with lower profitability, as reflected in the reduction in the net profit ratio. The lower ROE suggests that shareholders ' capital was utilised less efficiently during the year.

Inventory Turnover Ratio

The inventory turnover ratio improved from 0.69 in 2025 to 0.93 in 2026. This indicates that inventory was converted into sales more efficiently than in the previous year. However, the ratio remains relatively low, suggesting that inventory continues to remain with the company for a considerable period. Interestingly, the cash flow statement shows that inventories resulted in a substantial cash outflow of Rs 9.86 crore in 2026. Therefore, despite the improvement in the turnover ratio, inventory management remains an important area requiring attention.

Trade Receivables Turnover Ratio

The trade receivables turnover ratio declined from 47.01 in 2025 to 44.52 in 2026. This indicates a marginal slowdown in the collection of receivables and suggests that the company took slightly longer to convert credit sales into cash. However, the ratio is still quite high, indicating generally efficient receivables management. The cash flow statement also shows a Rs 0.66 crore cash inflow from the decrease in trade receivables, which indicates that receivables did contribute positively to cash generation during the year.

Trade Payables Turnover Ratio

The trade payables turnover ratio increased significantly from 83.18 in 2025 to 119.71 in 2026. A higher turnover ratio generally means that the company is paying its suppliers more quickly. While this may indicate good relationships with suppliers and timely settlement of obligations, it can also reduce the amount of working capital available to the company. In 2026, trade payables generated only a small cash inflow of Rs 0.08 crore, so the company did not obtain significant financing support from suppliers.

Net Capital Turnover Ratio

The net capital turnover ratio decreased from 2.78 in 2025 to 2.34 in 2026, indicating that the efficiency with which the company utilised its net working capital to generate revenue declined. The lower ratio suggests that a greater amount of working capital was required to support the company’s operations. This is particularly relevant given the substantial amount of cash tied up in inventories. The decline therefore points toward a need for more efficient utilisation of working capital.

Net Profit Ratio

The net profit ratio declined sharply from 11.91% in 2025 to 5.23% in 2026, representing one of the most significant negative movements among the ratios. This means that the company earned only around Rs 5.23 of net profit for every Rs 100 of revenue in 2026, compared with Rs 11.91 in 2025. The decline indicates considerable pressure on overall profitability. It also explains the reduction in ROE and contributes to the weaker debt-service capacity of the company.

Return on Capital Employed

The return on capital employed (ROCE) declined from 8.92% in 2025 to 6.50% in 2026, indicating that the company generated a lower return from the total capital employed in the business. The fall suggests reduced efficiency in the utilisation of both equity and debt capital. Lower profitability combined with the continuing cost of borrowed funds appears to have weakened the return generated on the capital base. Management should therefore focus on improving operating profitability and ensuring that capital is invested in assets and activities capable of generating adequate returns.