Does Waaree Renewable Technologies (NSE:WAAREERTL) Have A Healthy Balance Sheet?

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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. We can see that Waaree Renewable Technologies Limited (NSE:WAAREERTL) does use debt in its business. But is this debt a concern to shareholders?

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What Risk Does Debt Bring?

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, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does Waaree Renewable Technologies Carry?

You can click the graphic below for the historical numbers, but it shows that Waaree Renewable Technologies had ₹273.7m of debt in March 2025, down from ₹411.8m, one year before. However, its balance sheet shows it holds ₹2.46b in cash, so it actually has ₹2.18b net cash.

How Strong Is Waaree Renewable Technologies' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Waaree Renewable Technologies had liabilities of ₹6.13b due within 12 months and liabilities of ₹522.3m due beyond that. Offsetting these obligations, it had cash of ₹2.46b as well as receivables valued at ₹5.07b due within 12 months. So it actually has ₹869.9m more liquid assets than total liabilities.

This state of affairs indicates that Waaree Renewable Technologies' balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So while it's hard to imagine that the ₹105.4b company is struggling for cash, we still think it's worth monitoring its balance sheet. Simply put, the fact that Waaree Renewable Technologies has more cash than debt is arguably a good indication that it can manage its debt safely.

Check out our latest analysis for Waaree Renewable Technologies

In addition to that, we're happy to report that Waaree Renewable Technologies has boosted its EBIT by 66%, thus reducing the spectre of future debt repayments. When analysing debt levels, the balance sheet is the obvious place to start. But it is Waaree Renewable Technologies'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. Waaree Renewable Technologies 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. Looking at the most recent three years, Waaree Renewable Technologies recorded free cash flow of 50% of its EBIT, which is weaker than we'd expect. That weak cash conversion makes it more difficult to handle indebtedness.

Summing Up

While it is always sensible to investigate a company's debt, in this case Waaree Renewable Technologies has ₹2.18b in net cash and a decent-looking balance sheet. And we liked the look of last year's 66% year-on-year EBIT growth. So we don't think Waaree Renewable Technologies's use of debt is risky. There's no doubt that we learn most about debt from the balance sheet. 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 Waaree Renewable Technologies 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.