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Summary: When a company's cash conversion cycle suddenly falls by half, it usually means one of two very different things. One kind of improvement compounds. The other reverses the moment the one-off event ends. We checked five large companies to see which kind they actually had.
Every business has a gap between spending money and getting it back.
A manufacturer buys raw materials, turns them into products, ships them to customers and then waits to be paid. That waiting period, from the moment cash goes out to the moment it comes back, is what the cash conversion cycle measures. The shorter it is, the less money is sitting idle inside the business. The longer it is, the more the company needs to borrow just to keep running.
When a company cuts this cycle sharply, it usually means one of two things. Either the business has genuinely become more efficient: collecting faster, holding less inventory, negotiating better payment terms with suppliers. Or something one-off happened: a large project was sold down, a big customer paid early, commodity prices moved favourably. The first kind of improvement compounds over time. The second reverses.
We filtered companies with a market capitalisation above Rs 10,000 crore whose cash conversion cycle has fallen by more than 50 per cent over three years. Then we asked the harder question: Which kind of improvement is this?
Who made the cut
Five large companies where working capital days fell by more than half over three years
| Company | FY23 working capital days | FY26 working capital days | Decrease (%) | Stock Rating |
|---|---|---|---|---|
| Crompton Greaves Consumer Electricals | 18.2 | 3.8 | -79.1 | 04-May |
| Hitachi Energy India | 56.3 | 18 | -68 | 03-May |
| Shyam Metalics and Energy | 36.4 | 13.8 | -62.1 | 05-May |
| Chalet Hotels | 108.7 | 47 | -56.8 | 03-May |
| Inox Wind | 674.6 | 313.2 | -53.6 | 01-May |
| Inox Wind's working capital days remain high in absolute terms at 313 despite the improvement. Its stock rating of 1 out of 5 reflects significant business challenges that the working capital movement alone does not resolve. It is not analysed further here. | ||||
Crompton Greaves: Fixing the leaky tap
Crompton sells fans, pumps, lighting, appliances and kitchen products.
When a company sells through weak channels, distributors who pay slowly, institutional buyers who stretch credit, stock that sits on shelves for months, money gets stuck. That is what was happening at Crompton before the Butterfly acquisition cleanup. The business was growing, but a portion of every sale was funding slow payers and slow-moving inventory rather than coming back as cash.
What changed was not a dramatic operational overhaul. Inventory actually rose from Rs 830 crore to Rs 882 crore between FY24 and FY25. What improved was collections. Trade receivables fell from Rs 721 crore to Rs 691 crore even as revenue grew, and the company started taking longer to pay its own suppliers, which freed up cash.
The real story is a channel reset. After the Butterfly acquisition revealed governance and execution problems, Crompton made leadership changes, reduced reliance on institutional buyers with poor payment records and pushed harder through direct-to-consumer channels. By FY26, alternate channels contributed 16 per cent of revenue and all consumer-facing channels were growing in double digits.
The improvement is partly structural, rooted in real business changes rather than one-off events. But it is not a complete transformation. Inventory discipline is not the driver. If demand weakens or Butterfly's recovery stalls, the improvement could slow.
Hitachi Energy India: Getting paid faster by working faster
Hitachi Energy India makes transformers, power-transmission equipment and large electrical infrastructure systems.
This is a project business. When you build a substation or a power grid connection for a utility, you do not get paid all at once. You get paid in stages, when you hit certain milestones, when the customer inspects the work, when the project goes live. If execution slows, the milestones get delayed, and so does the cash.
Hitachi's improvement comes from executing faster. In FY26, revenue rose 27.6 per cent to Rs 8,148 crore and the order backlog, which is future work already contracted, rose 53.5 per cent to Rs 29,555 crore. The company commissioned India's first high-voltage direct current power link in a city centre, in Mumbai. Faster execution means milestone payments arrive sooner, less money sits in partially completed work and the cash cycle shortens.
The company also does more service and maintenance work alongside large new projects. Servicing existing equipment is simpler and gets paid faster than building something new from scratch, which helps the overall cash position.
That said, this improvement is not locked in permanently. Project businesses can see sharp swings when execution slows or large orders shift between quarters. The real test is whether the strong operating cash flow continues as Hitachi works through its record order backlog over the next two to three years.
Chalet Hotels: A real estate story wearing a hotel uniform
Chalet Hotels owns and operates luxury hotels and had a residential real estate project in Bengaluru.
This is the most important cautionary case in the screen and the easiest one to misread.
Hotels do not carry inventory the way factories do. A hotel's inventory is rooms for the night, which cannot be stored. So when a hotel company's inventory days fall sharply, the obvious question is: what inventory fell?
In Chalet's case, the answer is residential apartments in Bengaluru. The company built a housing project and by FY24 had started selling units after receiving occupancy certificates. Sales gained strong traction. By FY25, over 90 per cent of the project's apartments had been sold. As units sold and cash came in, the inventory on the balance sheet shrank and the cash conversion cycle improved.
This is genuinely good for Chalet's cash flow and debt levels. But it is not evidence that the hotel business has become more efficient. It is a real estate project reaching the end of its life. Once the remaining apartments are sold, this source of working capital improvement disappears unless the company launches another residential project.
The core hotel business has improved since FY23. Occupancy is higher, room rates are better, resort and commercial assets are performing well. But that is a profitability story, not a working capital story. The sharp fall in cash conversion cycle days came from selling apartments, not from running hotels more efficiently.
Telling apart a genuine operational improvement from a one-off accounting flattery, as Chalet shows, takes more than a single ratio. Value Research Stock Advisor digs into exactly this kind of detail before recommending any business, so you know what's actually driving the numbers.
See the difference for yourself.
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