We Think Techno Electric & Engineering (NSE:TECHNOE) Can Stay On Top Of Its Debt

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a 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 Techno Electric & Engineering Company Limited (NSE:TECHNOE) makes use of debt. But the more important question is: how much risk is that debt creating?

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What Risk Does Debt Bring?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Techno Electric & Engineering's Debt?

As you can see below, at the end of September 2025, Techno Electric & Engineering had ₹612.3m of debt, up from none a year ago. Click the image for more detail. However, its balance sheet shows it holds ₹26.2b in cash, so it actually has ₹25.6b net cash.

How Healthy Is Techno Electric & Engineering's Balance Sheet?

According to the last reported balance sheet, Techno Electric & Engineering had liabilities of ₹9.93b due within 12 months, and liabilities of ₹5.19b due beyond 12 months. On the other hand, it had cash of ₹26.2b and ₹7.74b worth of receivables due within a year. So it can boast ₹18.8b more liquid assets than total liabilities.

This surplus suggests that Techno Electric & Engineering has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, Techno Electric & Engineering boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for Techno Electric & Engineering

In addition to that, we're happy to report that Techno Electric & Engineering has boosted its EBIT by 83%, thus reducing the spectre of future debt repayments. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine Techno Electric & Engineering's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. Techno Electric & Engineering 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. During the last three years, Techno Electric & Engineering burned a lot of cash. 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 Techno Electric & Engineering has ₹25.6b in net cash and a decent-looking balance sheet. And we liked the look of last year's 83% year-on-year EBIT growth. So we are not troubled with Techno Electric & Engineering's debt use. 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. Be aware that Techno Electric & Engineering is showing 2 warning signs in our investment analysis , and 1 of those is significant...

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.