INOX India (NSE:INOXINDIA) Seems To Use Debt Quite Sensibly

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. We note that INOX India Limited (NSE:INOXINDIA) does have debt on its balance sheet. But is this debt a concern to shareholders?

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What Risk Does Debt Bring?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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 INOX India's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of September 2025 INOX India had ₹905.0m of debt, an increase on ₹870.0m, over one year. But it also has ₹3.03b in cash to offset that, meaning it has ₹2.12b net cash.

How Healthy Is INOX India's Balance Sheet?

The latest balance sheet data shows that INOX India had liabilities of ₹8.86b due within a year, and liabilities of ₹292.6m falling due after that. Offsetting these obligations, it had cash of ₹3.03b as well as receivables valued at ₹5.08b due within 12 months. So it has liabilities totalling ₹1.04b more than its cash and near-term receivables, combined.

This state of affairs indicates that INOX India's balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So it's very unlikely that the ₹111.8b company is short on cash, but still worth keeping an eye on the balance sheet. Despite its noteworthy liabilities, INOX India boasts net cash, so it's fair to say it does not have a heavy debt load!

View our latest analysis for INOX India

And we also note warmly that INOX India grew its EBIT by 18% last year, making its debt load easier to handle. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if INOX 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.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. While INOX 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. Considering the last three years, INOX India actually recorded a cash outflow, overall. Debt is far more risky for companies with unreliable free cash flow, so shareholders should be hoping that the past expenditure will produce free cash flow in the future.

Summing Up

We could understand if investors are concerned about INOX India's liabilities, but we can be reassured by the fact it has has net cash of ₹2.12b. And we liked the look of last year's 18% year-on-year EBIT growth. So we don't have any problem with INOX India's use of debt. 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. These risks can be hard to spot. Every company has them, and we've spotted 1 warning sign for INOX India 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.