We Think IFB Industries (NSE:IFBIND) Can Manage Its Debt With Ease

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 IFB Industries Limited (NSE:IFBIND) makes use of debt. But should shareholders be worried about its use of debt?

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When Is Debt A Problem?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. 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. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

How Much Debt Does IFB Industries Carry?

As you can see below, at the end of March 2025, IFB Industries had ₹2.50b of debt, up from ₹1.64b a year ago. Click the image for more detail. But on the other hand it also has ₹3.24b in cash, leading to a ₹734.4m net cash position.

How Strong Is IFB Industries' Balance Sheet?

The latest balance sheet data shows that IFB Industries had liabilities of ₹12.6b due within a year, and liabilities of ₹2.52b falling due after that. On the other hand, it had cash of ₹3.24b and ₹4.33b worth of receivables due within a year. So it has liabilities totalling ₹7.60b more than its cash and near-term receivables, combined.

Of course, IFB Industries has a market capitalization of ₹71.6b, 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, IFB Industries boasts net cash, so it's fair to say it does not have a heavy debt load!

View our latest analysis for IFB Industries

The good news is that IFB Industries has increased its EBIT by 8.6% over twelve months, which should ease any concerns about debt repayment. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine IFB 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.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. IFB 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. During the last three years, IFB Industries generated free cash flow amounting to a very robust 92% of its EBIT, more than we'd expect. That positions it well to pay down debt if desirable to do so.

Summing Up

While IFB Industries does have more liabilities than liquid assets, it also has net cash of ₹734.4m. The cherry on top was that in converted 92% of that EBIT to free cash flow, bringing in ₹116m. So is IFB Industries's debt a risk? It doesn't seem so to us. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. For example, we've discovered 1 warning sign for IFB Industries that you should be aware of before investing here.

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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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.