L&T Technology Services (NSE:LTTS) Has A Rock Solid Balance Sheet

Warren Buffett famously said, '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. As with many other companies L&T Technology Services Limited (NSE:LTTS) makes use of debt. But is this debt a concern to shareholders?

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When Is Debt Dangerous?

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 frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. When we examine debt levels, we first consider both cash and debt levels, together.

What Is L&T Technology Services's Debt?

You can click the graphic below for the historical numbers, but it shows that L&T Technology Services had ₹5.78b of debt in March 2025, down from ₹6.59b, one year before. But it also has ₹25.3b in cash to offset that, meaning it has ₹19.5b net cash.

How Strong Is L&T Technology Services' Balance Sheet?

We can see from the most recent balance sheet that L&T Technology Services had liabilities of ₹29.9b falling due within a year, and liabilities of ₹5.56b due beyond that. Offsetting these obligations, it had cash of ₹25.3b as well as receivables valued at ₹36.3b due within 12 months. So it can boast ₹26.1b more liquid assets than total liabilities.

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

See our latest analysis for L&T Technology Services

But the other side of the story is that L&T Technology Services saw its EBIT decline by 3.2% over the last year. If earnings continue to decline at that rate the company may have increasing difficulty managing its debt load. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if L&T Technology Services can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. While L&T Technology Services 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. During the last three years, L&T Technology Services produced sturdy free cash flow equating to 78% of its EBIT, about what we'd expect. This free cash flow puts the company in a good position to pay down debt, when appropriate.

Summing Up

While it is always sensible to investigate a company's debt, in this case L&T Technology Services has ₹19.5b in net cash and a decent-looking balance sheet. The cherry on top was that in converted 78% of that EBIT to free cash flow, bringing in ₹14b. So is L&T Technology Services's debt a risk? It doesn't seem so to us. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. To that end, you should be aware of the 1 warning sign we've spotted with L&T Technology Services .

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.