Gabriel India (NSE:GABRIEL) Has A Pretty Healthy Balance Sheet

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. Importantly, Gabriel India Limited (NSE:GABRIEL) does carry debt. But the real question is whether this debt is making the company risky.

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When Is Debt A Problem?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Gabriel India's Net Debt?

The image below, which you can click on for greater detail, shows that at September 2025 Gabriel India had debt of ₹398.1m, up from ₹339.3m in one year. But it also has ₹1.21b in cash to offset that, meaning it has ₹809.9m net cash.

A Look At Gabriel India's Liabilities

Zooming in on the latest balance sheet data, we can see that Gabriel India had liabilities of ₹8.95b due within 12 months and liabilities of ₹869.6m due beyond that. Offsetting this, it had ₹1.21b in cash and ₹7.07b in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₹1.54b.

This state of affairs indicates that Gabriel India's balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So while it's hard to imagine that the ₹146.5b company is struggling for cash, we still think it's worth monitoring its balance sheet. While it does have liabilities worth noting, Gabriel India also has more cash than debt, so we're pretty confident it can manage its debt safely.

See our latest analysis for Gabriel India

And we also note warmly that Gabriel India grew its EBIT by 19% last year, making its debt load easier to handle. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if Gabriel India can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. While Gabriel India has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. In the last three years, Gabriel India created free cash flow amounting to 13% of its EBIT, an uninspiring performance. That limp level of cash conversion undermines its ability to manage and pay down debt.

Summing Up

We could understand if investors are concerned about Gabriel India's liabilities, but we can be reassured by the fact it has has net cash of ₹809.9m. And it impressed us with its EBIT growth of 19% over the last year. So we don't have any problem with Gabriel India's use of debt. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. For example Gabriel India has 3 warning signs (and 1 which is potentially serious) we think you should know about.

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.