A woollens maker sells 70% of its year in four winter months but produces evenly. Find its peak working capital need and size a seasonal credit line.

Working capital peaks at about Rs 176 crore at the end of November and falls to about Rs 42 crore at the end of March. Even production builds stock from April to September; then sales jump and 60-day credit turns the stock into receivables. Fund the Rs 42 crore that never goes away with long-term money, and the Rs 134 crore swing with a seasonal line drawn from April and repaid from collections by March.

Think of a mango seller who buys from the orchard every week but sells mostly in May. All year the stock piles up and has to be paid for; the cash only comes back in the season. Ushnika makes Rs 21.7 crore of goods every month but sells only Rs 9.75 crore worth, at cost, in each off-season month, so stock grows by about Rs 11.9 crore a month from April to September. Suppliers wait only 30 days, so almost all of that stock is funded by Ushnika.

Three lines, each from one rule. Inventory: last month plus production less the cost of what was sold, anchored at Rs 10 crore at the end of January. Receivables: 60 days means this month's and last month's sales are unpaid. Payables: 30 days of production, Rs 21.7 crore every month. Net working capital is inventory plus receivables less payables, and the seasonal peakThe highest point of a working capital cycle that rises and falls within the year, as opposed to the permanent level that never goes away. comes when stock is still high and receivables have already jumped.

Split the need into two parts. About Rs 42 crore is needed even at the year's low, so it is permanent and belongs to long-term funding; the remaining Rs 134 crore comes and goes each year and is what a seasonal line is for. A bank would add headroom for a late season or slow payers, say 10 to 15%, taking the line towards Rs 150 crore. It is drawn as stock builds from April, peaks in November, and is repaid from December to March as January's and February's collections arrive.

Two checks keep the answer honest. Sizing to the average need of about Rs 103 crore would leave Ushnika short for the four months that matter most. And the whole plan relies on the season arriving: a warm winter leaves stock unsold, the line cannot be repaid in March, and seasonal debt quietly becomes permanent. A lender would ask for a clean-down period each year, when the line must be repaid in full, to test exactly that.