- Dixon Technologies' revenue rose 35% to Rs 37,938 crore in H1FY27
- Operating cash flow turned negative Rs 280 crore from positive Rs 881 crore
- Inventory and receivables surged, absorbing Rs 9,100 crore in cash flow
Dixon Technologies' strong revenue and profit growth in the first half of FY27 has not translated into operating cash generation. The electronics manufacturer reported a 35% year-on-year increase in revenue to Rs 37,938 crore, but operating cash flow swung to an outflow of Rs 280 crore from an inflow of Rs 881 crore in the corresponding period last year. The divergence reflects the increase in cash tied up in inventory and customer receivables during the period.
The pressure on cash flows comes despite a 10% increase in net profit to Rs 1,129 crore. EBITDA rose 8% to Rs 1,657 crore, while EBITDA margin contracted 110 basis points to 4.4%, partly following the expiry of PLI 1.0 benefits.
-
Indian Markets Turning Corner After Two Tough Years, Says Sandeep Tandon -
NDTV Profit Ignite 2026: Experts See Opportunity In Equities, Stay Bullish For Long-Term -
Buy Right, Sit Tight Does Not Work for Individual Stocks, Says Dinshaw Irani -
'Worst Is Behind': Quant MF Sees Market Bottom, Flags 'Extreme Euphoria' In Midcaps -
India's Mutual Fund Industry Could Become A $1 Trillion Opportunity, Say Fund Managers -
'Foreign Investors Are Baraatis': Raamdeo Agrawal's Take On LTCG Tax -
Stay Invested Through Market Cycles: Raamdeo Agrawal at NDTV Profit Ignite -
Ramesh Damani Remains Bullish On India For Next 20-30 Years, Sees Bargains Amid Market Weakness -
CAS Came After A Long Consultation Process: SEBI Chairman Tuhin Kanta Pandey AT NDTV PROFIT IGNITE -
Aim To Cut FPI Onboarding Time From Mth To Five Days: SEBI Chairman Tuhin Kanta Pandey AT NDTV PROFI
The balance sheet shows the extent of the working capital build-up. Inventory increased to Rs 7,064 crore as of September 30, 2026, from Rs 3,837 crore on March 31. Trade receivables nearly doubled to Rs 12,401 crore from Rs 6,530 crore over the same period. Trade payables also rose, reaching Rs 19,566 crore against Rs 10,722 crore. Meanwhile, cash and cash equivalents declined to Rs 389 crore from Rs 767 crore.
Also Read | Layoffs Are Rising In Tech, But These Skills Are Helping People Unlock Better Pay
The cash flow statement shows that inventory absorbed Rs 3,227 crore during H1FY27, while receivables accounted for another Rs 5,873 crore. The increase in trade payables provided a cash flow benefit of Rs 8,855 crore, partly offsetting the outflow.
The increase in working capital reflects higher component costs, inventory accumulation ahead of the festive season and outstanding incentive payments. These factors have increased the amount of cash tied up in the business despite growth in reported revenue and profit.
ALSO READ | Dixon Tech Q2 Review: The Price-Hike Paradox. Can Vivo Reverse The Mobile Volume Slide?
Working Capital Drivers
Rising memory chip prices and inventory accumulation ahead of the festive season account for a significant part of the increase in inventory and receivables. DRAM and NAND memory prices have climbed, with these components historically accounting for around 12% to 13% of a smartphone's bill of materials.
Management said higher memory chip costs drove a 35% to 40% year-on-year increase in average smartphone selling prices in Q2FY27. Dixon operates on a cost-plus contract model across its electronics manufacturing services business. It passes changes in raw material costs to brand customers, while its per-unit conversion fees remain fixed.
Higher component prices increase the value of customer invoices and the inventory carried on the balance sheet. However, they do not necessarily translate into higher manufacturing volumes or a corresponding increase in operating profitability.
Smartphone volumes illustrate this distinction. Dixon produced 172 lakh units in H1FY27, unchanged from the corresponding period last year. The increase in average selling prices, therefore, contributed to revenue growth without a corresponding increase in smartphone production volumes.
The company also accumulated component inventory during the first half to secure supplies ahead of the festive season. This increased the amount of cash tied up in stock, while higher component prices raised the value of that inventory.
Pending production-linked incentive claims have added to the receivables balance. These claims across the mobile, telecom and IT hardware segments stood at approximately Rs 1,380 crore at the end of FY26, with further claims accumulating during H1FY27.
Management said customer relationships and payment arrangements remain intact, with no payment defaults reported. The increase in receivables is also linked to higher invoice values arising from component cost pass-through and outstanding government incentives.
ALSO READ | Dixon's Revenue Growth Gets A Memory Chip Boost, But Volumes Tell A Different Story
Supplier Credit
The increase in inventory and receivables would have placed greater pressure on operating cash flow without the corresponding rise in trade payables.
Dixon absorbed nearly Rs 9,100 crore through inventory and receivables during H1FY27. Trade payables increased by Rs 8,855 crore, providing a cash flow benefit equivalent to approximately 97% of the amount absorbed by these two items.
The relationship reflects the company's procurement model. Dixon operates with continuous supplier credit arrangements, typically ranging from 30 to 60 days. As component procurement increases, outstanding payments to suppliers also rise, providing a source of funding for working capital.
Management said vendor payables increase in line with production requirements. Higher raw material prices also raise the value of outstanding supplier payments. The increase in payables is therefore linked largely to the higher value of procurement rather than a change in supplier payment practices.
The increase in payables has helped offset the cash absorbed by inventory and receivables. However, the corresponding balances still need to be converted into sales and collections.
Management expects 80% to 85% of the working capital absorbed during H1FY27 to be released by March 31, 2027. Group CFO Saurabh Gupta said the liquidation of festive inventory, collection of pending PLI incentives and reduction in component stock held by the company would support the release.
Expansion And Capex
Working capital is not the only competing demand on Dixon's cash. The company is expanding backward integration across components, including display and camera modules, IT hardware and optical components. These investments are intended to increase value addition and reduce dependence on outsourced components. Management expects them to improve margins by 80-100 basis points from FY28.
Dixon has budgeted capital expenditure of Rs 1,200-1,300 crore for FY27. It spent around Rs 700 crore during H1FY27, leaving the remaining expenditure for the second half. Management plans to fund the investment entirely through internal cash generation without taking on debt.
The company generated more than Rs 700 crore in free cash flow in FY26 while spending Rs 1,058 crore on capital expenditure. Its working capital cycle was negative eight days in Q4FY26, before moderating to negative five days in Q1FY27.
H1FY27, however, ended with negative operating cash flow of Rs 280 crore.
Funding the remaining capital expenditure through internal cash generation will depend partly on the release of working capital currently tied up in the balance sheet. Management expects 80% to 85% of the H1 absorption to be reversed by March 31, 2027.
Cash Conversion
Dixon's H1FY27 performance reflects the impact of higher component prices, festive-season inventory accumulation and pending PLI claims on working capital. Revenue increased 35% and net profit rose 10%, but operating cash flow turned negative as inventory and receivables absorbed nearly Rs 9,100 crore.
The increase in trade payables provided a cash flow benefit of Rs 8,855 crore during the period. Management expects the liquidation of festive inventory, collection of pending PLI incentives and reduction in component stock to release 80% to 85% of the working capital absorbed during H1 by March 31, 2027.
The timing of this release will coincide with the company's remaining FY27 capital expenditure of around Rs 500-600 crore. Management plans to fund this expenditure through internal cash generation without taking on debt.
The extent of the working capital release and the resulting operating cash flow in H2FY27 will show how much of the cash absorbed during the first half returns to the business.
Disclaimer: The views expressed in this article are solely those of the author and do not necessarily reflect the opinion of NDTV Profit or its affiliates. Readers are advised to conduct their own research or consult a qualified professional before making any investment or business decisions. NDTV Profit does not guarantee the accuracy, completeness, or reliability of the information presented in this article.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
