Here's Why Nava (NSE:NAVA) Can Manage Its Debt Responsibly

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.' 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. We can see that Nava Limited (NSE:NAVA) does use debt in its business. But the real question is whether this debt is making the company risky.

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When Is Debt A Problem?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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, 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.

What Is Nava's Net Debt?

As you can see below, at the end of September 2025, Nava had ₹15.9b of debt, up from ₹6.78b a year ago. Click the image for more detail. But it also has ₹25.4b in cash to offset that, meaning it has ₹9.50b net cash.

How Healthy Is Nava's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Nava had liabilities of ₹5.82b due within 12 months and liabilities of ₹19.3b due beyond that. Offsetting these obligations, it had cash of ₹25.4b as well as receivables valued at ₹9.45b due within 12 months. So it actually has ₹9.71b more liquid assets than total liabilities.

This short term liquidity is a sign that Nava could probably pay off its debt with ease, as its balance sheet is far from stretched. Simply put, the fact that Nava has more cash than debt is arguably a good indication that it can manage its debt safely.

View our latest analysis for Nava

On the other hand, Nava saw its EBIT drop by 7.1% in the last twelve months. That sort of decline, if sustained, will obviously make debt harder to handle. The balance sheet is clearly the area to focus on when you are analysing debt. But it is Nava'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.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. Nava may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. Over the last three years, Nava actually produced more free cash flow than EBIT. There's nothing better than incoming cash when it comes to staying in your lenders' good graces.

Summing Up

While it is always sensible to investigate a company's debt, in this case Nava has ₹9.50b in net cash and a decent-looking balance sheet. And it impressed us with free cash flow of ₹12b, being 137% of its EBIT. So is Nava's debt a risk? It doesn't seem so to us. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. To that end, you should be aware of the 1 warning sign we've spotted with Nava .

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.