DOMS Industries (NSE:DOMS) Has A Pretty Healthy Balance Sheet

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says '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 DOMS Industries Limited (NSE:DOMS) makes use of debt. But the more important question is: how much risk is that debt creating?

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Why Does Debt Bring Risk?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. 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 DOMS Industries Carry?

The image below, which you can click on for greater detail, shows that at March 2025 DOMS Industries had debt of ₹1.53b, up from ₹1.16b in one year. But it also has ₹2.25b in cash to offset that, meaning it has ₹722.7m net cash.

How Strong Is DOMS Industries' Balance Sheet?

We can see from the most recent balance sheet that DOMS Industries had liabilities of ₹2.57b falling due within a year, and liabilities of ₹1.80b due beyond that. Offsetting this, it had ₹2.25b in cash and ₹1.36b in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₹755.5m.

Having regard to DOMS Industries' size, it seems that its liquid assets are well balanced with its total liabilities. So while it's hard to imagine that the ₹143.1b company is struggling for cash, we still think it's worth monitoring its balance sheet. Despite its noteworthy liabilities, DOMS Industries boasts net cash, so it's fair to say it does not have a heavy debt load!

Check out our latest analysis for DOMS Industries

Another good sign is that DOMS Industries has been able to increase its EBIT by 26% in twelve months, making it easier to pay down debt. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine DOMS Industries'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.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. DOMS Industries 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, DOMS Industries reported free cash flow worth 5.6% of its EBIT, which is really quite low. That limp level of cash conversion undermines its ability to manage and pay down debt.

Summing Up

While it is always sensible to look at a company's total liabilities, it is very reassuring that DOMS Industries has ₹722.7m in net cash. And it impressed us with its EBIT growth of 26% over the last year. So we don't have any problem with DOMS Industries's use of debt. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. Case in point: We've spotted 1 warning sign for DOMS Industries you should be aware of.

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.