Health Check: How Prudently Does Ola Electric Mobility (NSE:OLAELEC) Use Debt?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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, Ola Electric Mobility Limited (NSE:OLAELEC) does carry debt. But should shareholders be worried about its use of debt?

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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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together.

How Much Debt Does Ola Electric Mobility Carry?

As you can see below, at the end of March 2025, Ola Electric Mobility had ₹30.4b of debt, up from ₹23.9b a year ago. Click the image for more detail. But on the other hand it also has ₹35.2b in cash, leading to a ₹4.75b net cash position.

How Healthy Is Ola Electric Mobility's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Ola Electric Mobility had liabilities of ₹35.5b due within 12 months and liabilities of ₹23.8b due beyond that. Offsetting these obligations, it had cash of ₹35.2b as well as receivables valued at ₹90.0m due within 12 months. So it has liabilities totalling ₹24.1b more than its cash and near-term receivables, combined.

Since publicly traded Ola Electric Mobility shares are worth a total of ₹179.8b, it seems unlikely that this level of liabilities would be a major threat. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. While it does have liabilities worth noting, Ola Electric Mobility also has more cash than debt, so we're pretty confident it can manage its debt safely. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Ola Electric Mobility's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Check out our latest analysis for Ola Electric Mobility

In the last year Ola Electric Mobility had a loss before interest and tax, and actually shrunk its revenue by 9.9%, to ₹45b. We would much prefer see growth.

So How Risky Is Ola Electric Mobility?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And in the last year Ola Electric Mobility had an earnings before interest and tax (EBIT) loss, truth be told. And over the same period it saw negative free cash outflow of ₹34b and booked a ₹23b accounting loss. But at least it has ₹4.75b on the balance sheet to spend on growth, near-term. Summing up, we're a little skeptical of this one, as it seems fairly risky in the absence of free cashflow. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. Be aware that Ola Electric Mobility is showing 1 warning sign in our investment analysis , you should know about...

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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.