Ganesh Infraworld (NSE:GANESHIN) Seems To Use Debt Quite Sensibly

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. Importantly, Ganesh Infraworld Limited (NSE:GANESHIN) does carry debt. But the more important question is: how much risk is that debt creating?

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Why Does Debt Bring Risk?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. If things get really bad, the lenders can take control of the business. 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, plenty of companies use debt to fund growth, without any negative consequences. The first step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does Ganesh Infraworld Carry?

As you can see below, at the end of March 2025, Ganesh Infraworld had ₹378.5m of debt, up from ₹307.2m a year ago. Click the image for more detail. However, it does have ₹462.0m in cash offsetting this, leading to net cash of ₹83.5m.

A Look At Ganesh Infraworld's Liabilities

According to the last reported balance sheet, Ganesh Infraworld had liabilities of ₹816.4m due within 12 months, and liabilities of ₹36.8m due beyond 12 months. Offsetting these obligations, it had cash of ₹462.0m as well as receivables valued at ₹1.53b due within 12 months. So it actually has ₹1.14b more liquid assets than total liabilities.

This short term liquidity is a sign that Ganesh Infraworld could probably pay off its debt with ease, as its balance sheet is far from stretched. Succinctly put, Ganesh Infraworld boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for Ganesh Infraworld

Even more impressive was the fact that Ganesh Infraworld grew its EBIT by 131% over twelve months. If maintained that growth will make the debt even more manageable in the years ahead. There's no doubt that we learn most about debt from the balance sheet. But you can't view debt in total isolation; since Ganesh Infraworld will need earnings to service that debt. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. While Ganesh Infraworld 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. Over the last three years, Ganesh Infraworld saw substantial negative free cash flow, in total. While that may be a result of expenditure for growth, it does make the debt far more risky.

Summing Up

While it is always sensible to investigate a company's debt, in this case Ganesh Infraworld has ₹83.5m in net cash and a decent-looking balance sheet. And we liked the look of last year's 131% year-on-year EBIT growth. So we don't have any problem with Ganesh Infraworld's use of debt. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. For example, we've discovered 2 warning signs for Ganesh Infraworld (1 doesn't sit too well with us!) that you should be aware of before investing here.

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.