Does K.P.R. Mill (NSE:KPRMILL) Have A Healthy Balance Sheet?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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. We note that K.P.R. Mill Limited (NSE:KPRMILL) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

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What Risk Does Debt Bring?

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. 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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is K.P.R. Mill's Debt?

The image below, which you can click on for greater detail, shows that K.P.R. Mill had debt of ₹4.66b at the end of March 2025, a reduction from ₹11.6b over a year. But on the other hand it also has ₹5.79b in cash, leading to a ₹1.13b net cash position.

How Healthy Is K.P.R. Mill's Balance Sheet?

According to the last reported balance sheet, K.P.R. Mill had liabilities of ₹7.75b due within 12 months, and liabilities of ₹1.84b due beyond 12 months. Offsetting these obligations, it had cash of ₹5.79b as well as receivables valued at ₹6.86b due within 12 months. So it can boast ₹3.05b more liquid assets than total liabilities.

This state of affairs indicates that K.P.R. Mill's balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So while it's hard to imagine that the ₹382.3b company is struggling for cash, we still think it's worth monitoring its balance sheet. Simply put, the fact that K.P.R. Mill has more cash than debt is arguably a good indication that it can manage its debt safely.

View our latest analysis for K.P.R. Mill

While K.P.R. Mill doesn't seem to have gained much on the EBIT line, at least earnings remain stable for now. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if K.P.R. Mill 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.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. While K.P.R. Mill 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, K.P.R. Mill 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 it is always sensible to investigate a company's debt, in this case K.P.R. Mill has ₹1.13b in net cash and a decent-looking balance sheet. So we don't think K.P.R. Mill's use of debt is risky. 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. We've identified 1 warning sign with K.P.R. Mill , and understanding them should be part of your investment process.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.