Is Radiant Cash Management Services (NSE:RADIANTCMS) Using Too Much Debt?

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.' 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 note that Radiant Cash Management Services Limited (NSE:RADIANTCMS) does have debt on its balance sheet. But is this debt a concern to shareholders?

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When Is Debt Dangerous?

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. If things get really bad, the lenders can take control of the business. 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. 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 Radiant Cash Management Services's Debt?

You can click the graphic below for the historical numbers, but it shows that as of March 2025 Radiant Cash Management Services had ₹1.09b of debt, an increase on ₹256.5m, over one year. But on the other hand it also has ₹2.50b in cash, leading to a ₹1.41b net cash position.

How Strong Is Radiant Cash Management Services' Balance Sheet?

We can see from the most recent balance sheet that Radiant Cash Management Services had liabilities of ₹1.45b falling due within a year, and liabilities of ₹56.7m due beyond that. Offsetting these obligations, it had cash of ₹2.50b as well as receivables valued at ₹738.3m due within 12 months. So it actually has ₹1.73b more liquid assets than total liabilities.

This excess liquidity suggests that Radiant Cash Management Services is taking a careful approach to debt. Because it has plenty of assets, it is unlikely to have trouble with its lenders. Simply put, the fact that Radiant Cash Management Services has more cash than debt is arguably a good indication that it can manage its debt safely.

Check out our latest analysis for Radiant Cash Management Services

The good news is that Radiant Cash Management Services has increased its EBIT by 6.9% over twelve months, which should ease any concerns about debt repayment. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Radiant Cash Management Services will need earnings to service that debt. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. Radiant Cash Management Services 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, Radiant Cash Management Services produced sturdy free cash flow equating to 64% 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 we empathize with investors who find debt concerning, you should keep in mind that Radiant Cash Management Services has net cash of ₹1.41b, as well as more liquid assets than liabilities. So we don't think Radiant Cash Management Services'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. Be aware that Radiant Cash Management Services is showing 2 warning signs in our investment analysis , 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.