This is my understanding. There could be gaps. Inventory in the balance sheet could be raw material purchased and finished goods. This could be unmilled rice as well as rice left for ageing for KRBL (major part of inventory as ageing is part of the business model).
Inventory in the balance sheet is expensed in the P/L as ‘Cost of Materials consumed’ and as ‘Change in Inventory of Finished goods’ in the quarter where sale happens. Cost of materials could also be off-balance sheet as well for KRBL - For eg. Power, fuel, packaging etc. Change in inventory is negative when goods produced during the quarter didn’t contribute to the topline but went towards inventory and positive if finished goods from the inventory were sold in the quarter. For KRBL, finished goods seem to be hardly stored in inventory - so its mostly rice stored for ageing. Most of the inventory expensing happens via ‘Cost of materials consumed’.
You can see the same in this.
See how the inventory moves every 6 months. Please note that half-yearly numbers are for half-year (Mar-Sep) while March numbers are for whole year. Procurement season is in the second half of the year and the borrowings (mostly short-term, for WC) as well moves in a cycle in sync with the inventory. Inventory is definitely expensed via Cost of materials as the other expense line-items are too small in comparison to the topline.
Value of inventory I think is at cost for KRBL since value is usually either cost or realisable value - whichever is lower. So the 1289 Cr inventory KRBL holds in Sep-17 could have been built in FY17 procurement season and a relatively small part of it even earlier in FY16. Another thing to note is that not all product lines of KRBL are aged for 2 years - if I am not mistaken only India Gate Classic is, so that will also dictate what % of the inventory is held for what lengths.