We Think Dixon Technologies (India) (NSE:DIXON) Can Stay On Top Of Its Debt

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 seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. As with many other companies Dixon Technologies (India) Limited (NSE:DIXON) makes use of debt. But should shareholders be worried about its use of debt?

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When Is Debt A Problem?

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. 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, debt can be an important tool in businesses, particularly capital heavy businesses. When we think about a company's use of debt, we first look at cash and debt together.

What Is Dixon Technologies (India)'s Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of March 2025 Dixon Technologies (India) had ₹2.02b of debt, an increase on ₹1.55b, over one year. But on the other hand it also has ₹2.64b in cash, leading to a ₹612.5m net cash position.

How Healthy Is Dixon Technologies (India)'s Balance Sheet?

The latest balance sheet data shows that Dixon Technologies (India) had liabilities of ₹126.0b due within a year, and liabilities of ₹7.02b falling due after that. On the other hand, it had cash of ₹2.64b and ₹69.7b worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₹60.7b.

Of course, Dixon Technologies (India) has a titanic market capitalization of ₹935.8b, so these liabilities are probably manageable. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. Despite its noteworthy liabilities, Dixon Technologies (India) boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for Dixon Technologies (India)

Better yet, Dixon Technologies (India) grew its EBIT by 128% last year, which is an impressive improvement. If maintained that growth will make the debt even more manageable in the years ahead. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Dixon Technologies (India)'s ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. Dixon Technologies (India) 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. In the last three years, Dixon Technologies (India)'s free cash flow amounted to 22% of its EBIT, less than we'd expect. That's not great, when it comes to paying down debt.

Summing Up

We could understand if investors are concerned about Dixon Technologies (India)'s liabilities, but we can be reassured by the fact it has has net cash of ₹612.5m. And we liked the look of last year's 128% year-on-year EBIT growth. So we don't have any problem with Dixon Technologies (India)'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. We've identified 1 warning sign with Dixon Technologies (India) , and understanding them should be part of your investment process.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.