Delta Manufacturing (NSE:DELTAMAGNT) Is Making Moderate Use Of Debt

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. As with many other companies Delta Manufacturing Limited (NSE:DELTAMAGNT) makes use of debt. But is this debt a concern to shareholders?

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When Is Debt A Problem?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. If things get really bad, the lenders can take control of the business. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Of course, plenty of companies use debt to fund growth, without any negative consequences. When we think about a company's use of debt, we first look at cash and debt together.

What Is Delta Manufacturing's Debt?

The image below, which you can click on for greater detail, shows that Delta Manufacturing had debt of ₹302.4m at the end of September 2025, a reduction from ₹386.2m over a year. However, because it has a cash reserve of ₹29.6m, its net debt is less, at about ₹272.8m.

How Strong Is Delta Manufacturing's Balance Sheet?

According to the last reported balance sheet, Delta Manufacturing had liabilities of ₹503.2m due within 12 months, and liabilities of ₹51.0m due beyond 12 months. Offsetting this, it had ₹29.6m in cash and ₹132.3m in receivables that were due within 12 months. So its liabilities total ₹392.3m more than the combination of its cash and short-term receivables.

This deficit isn't so bad because Delta Manufacturing is worth ₹856.6m, and thus could probably raise enough capital to shore up its balance sheet, if the need arose. But we definitely want to keep our eyes open to indications that its debt is bringing too much risk. The balance sheet is clearly the area to focus on when you are analysing debt. But it is Delta Manufacturing's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

View our latest analysis for Delta Manufacturing

Over 12 months, Delta Manufacturing made a loss at the EBIT level, and saw its revenue drop to ₹593m, which is a fall of 28%. To be frank that doesn't bode well.

Caveat Emptor

Not only did Delta Manufacturing's revenue slip over the last twelve months, but it also produced negative earnings before interest and tax (EBIT). To be specific the EBIT loss came in at ₹43m. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. So we think its balance sheet is a little strained, though not beyond repair. However, it doesn't help that it burned through ₹32m of cash over the last year. So to be blunt we think it is risky. 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. For example Delta Manufacturing has 3 warning signs (and 2 which can't be ignored) we think you should know about.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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.