Mid-caps stocks, like Havells India Limited (NSE:HAVELLS) with a market capitalization of ₹450.28b, aren’t the focus of most investors who prefer to direct their investments towards either large-cap or small-cap stocks. While they are less talked about as an investment category, mid-cap risk-adjusted returns have generally been better than more commonly focused stocks that fall into the small- or large-cap categories. Today we will look at HAVELLS’s financial liquidity and debt levels, which are strong indicators for whether the company can weather economic downturns or fund strategic acquisitions for future growth. Don’t forget that this is a general and concentrated examination of Havells India’s financial health, so you should conduct further analysis into HAVELLS here.
How does HAVELLS’s operating cash flow stack up against its debt?
HAVELLS’s debt levels have fallen from ₹2.08b to ₹1.15b over the last 12 months – this includes both the current and long-term debt. With this reduction in debt, HAVELLS’s cash and short-term investments stands at ₹15.07b , ready to deploy into the business. Moreover, HAVELLS has generated ₹10.99b in operating cash flow during the same period of time, resulting in an operating cash to total debt ratio of 953%, indicating that HAVELLS’s operating cash is sufficient to cover its debt. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In HAVELLS’s case, it is able to generate 9.53x cash from its debt capital.
Does HAVELLS’s liquid assets cover its short-term commitments?
Looking at HAVELLS’s most recent ₹25.30b liabilities, it seems that the business has been able to meet these obligations given the level of current assets of ₹37.07b, with a current ratio of 1.47x. Generally, for Electrical companies, this is a reasonable ratio since there’s sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Can HAVELLS service its debt comfortably?
With a debt-to-equity ratio of 3.1%, HAVELLS’s debt level is relatively low. HAVELLS is not taking on too much debt commitment, which may be constraining for future growth.
HAVELLS’s high cash coverage and low debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. In addition to this, the company exhibits proper management of current assets and upcoming liabilities. Keep in mind I haven’t considered other factors such as how HAVELLS has been performing in the past. I suggest you continue to research Havells India to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for HAVELLS’s future growth? Take a look at our free research report of analyst consensus for HAVELLS’s outlook.
- Valuation: What is HAVELLS worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether HAVELLS is currently mispriced by the market.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.