Case Study
Working capital
₹2 Cr of the Round Was Already Spoken For: How a Consumer Brand Found the Working Capital Gap Before Investors Did
A personal care brand planned a ₹10 Cr raise sized on operating burn. Growth itself would consume another ₹2 Cr in inventory and receivables. Separating the two changed the capital plan to ₹10 Cr equity plus a ₹2 Cr working capital line.
Published 2 October 20267 min read
The short answer
A profitable or near-profitable P&L does not tell you how much cash growth consumes. When revenue grows, inventory and receivables grow with it, and that cash has to come from somewhere. In this case, taking monthly revenue from ₹2.5 Cr to ₹4.4 Cr tied up about ₹2 Cr of extra working capital. Funding it with a working capital line instead of equity kept the raise at ₹10 Cr and kept the company above its minimum cash level.
Who this is for: Consumer and D2C founders selling through quick commerce, modern trade or distributors, planning a raise in the next six months.
Summary: what most founders miss
- Equity sized on operating burn alone will run short if the business grows. Growth needs cash for stock and for customers who pay later.
- Net working capital moves with revenue. Here it was about 1.05 times monthly revenue, so every ₹1 Cr of extra monthly sales tied up about ₹1.05 Cr.
- Investors check this in diligence. Finding the gap yourself turns a red flag into a sign of control.
- Working capital is better funded with a revolving line, receivables finance or supplier terms than with equity priced at a revenue multiple.
- Quick commerce and modern trade bring scale and credit periods together. Model the channel mix, not just total revenue.
The founders of a personal care brand had a clean plan. Monthly revenue was ₹2.5 Cr. They wanted to reach ₹4.4 Cr a month in 18 months by expanding in quick commerce and modern trade and adding two product lines. The operating model showed a cumulative loss of about ₹8.5 Cr over that period, mostly marketing and team, before the business turned EBITDA positive. Add a buffer, and the raise was ₹10 Cr.
The P&L was right. The cash plan was not. Nobody had modelled what happens to inventory and receivables when revenue grows by 76% and a larger share of it comes from channels that pay in 30 to 90 days.
Case study
₹2 Cr of the round was already spoken for
Personal care brand, ₹2.5 Cr monthly revenue: about 35% D2C, 25% marketplaces, 25% quick commerce, 15% modern trade
Situation
Raising ₹10 Cr sized on operating burn. The plan took monthly revenue to ₹4.4 Cr in 18 months.
What was missed
The equity ask was based on operating losses only, not on the cash needed to carry more inventory, wait for channel payments and keep a minimum balance.
What changed
We separated operating burn from working capital, mapped revenue growth to inventory, receivables and payables, then sized equity and debt separately.
Outcome
The capital plan became ₹10 Cr of equity plus a ₹2 Cr working capital facility, instead of trying to make equity finance the whole cash cycle.
The lesson
P&L profitability does not tell you how much cash growth consumes. Investors need to see the full cash requirement behind the growth plan.
Composite case built from patterns we see repeatedly in Indian consumer rounds. Figures are representative and internally consistent; they are not a single company's data. Market precedents are public and cited below.
The cash the P&L does not show
A P&L records a sale when it happens and a cost when it is incurred. Cash moves on a different clock. The brand pays its manufacturer for stock weeks before that stock sells, and its modern trade and quick commerce partners pay weeks after it sells. In between, the company is financing its own growth.
We rebuilt the brand's working capital from its actual terms:
| Item | Basis | Days | As a multiple of monthly revenue |
|---|---|---|---|
| Inventory | 60 days of cost of goods (cost of goods 45% of revenue) | 60 | 0.90x |
| Receivables | 40% of revenue from quick commerce and modern trade, average 45 days | 45 | 0.60x |
| Payables | 30 days credit from the contract manufacturer and packaging suppliers | 30 | 0.45x |
| Net working capital | Inventory + receivables − payables | 1.05x |
Swipe the table sideways to see all columns.
Days are measured on cost of goods for inventory and payables, and on revenue for receivables. Marketplace and D2C collections settle within about a week and are treated as near-cash.
So the business needed about ₹1.05 Cr of working capital for every ₹1 Cr of monthly revenue. At ₹2.5 Cr a month that was ₹2.6 Cr. At ₹4.4 Cr a month it would be ₹4.6 Cr. Growth alone would absorb about ₹2 Cr.
The cash bridge investors would have built
This is the bridge we built from the founders' plan, exactly as an investor's analyst would in diligence. The company started with ₹1.5 Cr in the bank.
On paper, the company would end the plan with about ₹1 Cr. In reality, it would have hit its minimum cash level around month 14, right when it needed to start its Series A conversations. A founder raising from a position of four months' runway negotiates very differently from one with ten.
Why the channel mix made it worse
Quick commerce was the brand's fastest-growing channel and the one investors were most excited about. It was also the one that changed the cash profile most. Quick commerce and modern trade partners typically pay on credit terms, and they require stock positioned in their warehouses or dark stores before a single unit sells.
As the plan shifted revenue toward those channels, receivables and inventory both grew faster than revenue. A brand moving from 40% to 55% B2B-channel revenue would need even more working capital than the table above. We explain how investors rebuild channel economics, including payment terms and fees, in your Amazon and quick commerce revenue is not your revenue.
What happens when working capital is ignored at scale
Bira 91 is a public example of how inventory and working capital problems compound. In 2023 the company converted from B9 Beverages Private Limited to B9 Beverages Limited as its shareholder count approached the 200-member limit for private companies. Because alcohol labels and licences are issued state by state, every permit and label had to be re-approved, and sales were disrupted for months. According to Finshots, FY24 revenue fell 22% to about ₹660 Cr, losses were about ₹740 Cr including an ₹80 Cr inventory write-off, operating cash flow was negative, and short-term liabilities exceeded short-term assets by about ₹620 Cr. Employees later petitioned about delayed salaries and vendor payment backlogs, and a reported ₹500 Cr structured debt deal did not go ahead.
The trigger was regulatory, but the damage came through stock that could not be sold and cash that could not be collected. Working capital is where operating problems turn into funding problems.
The capital plan, rebuilt
We split the ₹12 Cr total requirement by what each part of it funds:
| Use | Amount | Best source | Why |
|---|---|---|---|
| Operating losses until EBITDA positive | ₹8.5 Cr | Equity | Risk capital: it funds marketing, team and product that may or may not work |
| Minimum cash buffer | ₹1.5 Cr | Equity | Protects the company while it raises again |
| Inventory and receivables growth (net of supplier credit) | ₹2 Cr | Working capital facility | Self-liquidating: it turns back into cash every 60 to 90 days |
| Total | ₹12 Cr | ₹10 Cr equity + ₹2 Cr debt |
Swipe the table sideways to see all columns.
The ₹2 Cr facility was structured as a revolving working capital line against inventory and receivables, to be drawn as revenue grew. We also renegotiated payables with the contract manufacturer from 30 to 45 days on its largest SKUs, which reduced the peak requirement by about ₹40 lakh. The Credit Guarantee Scheme for Startups, which guarantees loans up to ₹20 Cr per borrower since May 2025, made the lender more comfortable; see government funding routes in 2026.
How investors read the change
When the founders presented the revised plan, they led with the working capital analysis instead of hiding it in the appendix. The conversation changed. Investors spent less time testing the model and more time on the growth plan, because the founders had already answered the question diligence would have raised.
Your working capital checklist before you raise
- Pull actual inventory days by SKU group and actual payment terms by channel from the last six months, not the contract terms.
- Calculate net working capital as a multiple of monthly revenue today.
- Apply that multiple to your revenue plan month by month, adjusting for channel mix changes.
- Build the cash bridge and find the lowest cash month.
- Decide which part of the gap is equity (losses and buffer) and which is debt (stock and receivables).
- Line up the debt provider so the facility can be signed within 30 to 60 days of the equity closing.
If you are also deciding how big the equity round should be, read the ₹20 Cr round that was too big, and for asset-heavy businesses, ₹6 Cr of equity was buying a machine.
Sources
Questions founders ask us
Why does a growing consumer brand run out of cash even when it is profitable?
Because growth needs more inventory and more money waiting with customers. If inventory and receivables grow faster than supplier credit, cash leaves the business even while the P&L shows a profit.
How do you calculate working capital needs for a raise?
Work out net working capital (inventory plus receivables minus payables) as a multiple of monthly revenue using your real terms, apply it to your monthly revenue plan, and add the increase to your cash requirement alongside operating losses.
Should working capital be funded with equity or debt?
Mostly debt or trade finance where available, because working capital turns back into cash within weeks or months. Equity is better used for operating losses and growth bets. Investors generally prefer this split.
What payment terms do quick commerce and modern trade give brands in India?
Terms vary by platform, retailer and brand size, and change often. Many brands see payment cycles of a few weeks for quick commerce and longer for modern trade, plus the need to stock warehouses in advance. Use your own last six months of actual collections, not contract terms, in your model.
Will investors see working capital problems in diligence?
Yes. Financial diligence almost always rebuilds the cash flow from inventory days and receivable days. Finding and fixing the gap before the raise is far better than having an investor find it.
About the author
Written by the Alphamark Venture Partners team, a fundraising advisory firm helping founders raise seed, angel and pre-Series A rounds, with a focus on consumer, consumer tech and consumer AI. Figures are as of the date shown and are for general information; this is not legal, tax or investment advice.
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