Page Industries (NSE:PAGEIND) Seems To Use Debt Rather Sparingly

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that '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 Page Industries Limited (NSE:PAGEIND) makes use of debt. But should shareholders be worried about its use of debt?

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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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Page Industries's Net Debt?

The image below, which you can click on for greater detail, shows that at March 2025 Page Industries had debt of ₹2.62b, up from ₹1.85b in one year. But on the other hand it also has ₹4.62b in cash, leading to a ₹2.00b net cash position.

How Healthy Is Page Industries' Balance Sheet?

We can see from the most recent balance sheet that Page Industries had liabilities of ₹10.1b falling due within a year, and liabilities of ₹2.25b due beyond that. Offsetting these obligations, it had cash of ₹4.62b as well as receivables valued at ₹1.92b due within 12 months. So it has liabilities totalling ₹5.82b more than its cash and near-term receivables, combined.

This state of affairs indicates that Page Industries' 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 ₹492.4b company is struggling for cash, we still think it's worth monitoring its balance sheet. Despite its noteworthy liabilities, Page Industries boasts net cash, so it's fair to say it does not have a heavy debt load!

View our latest analysis for Page Industries

Another good sign is that Page Industries has been able to increase its EBIT by 28% in twelve months, making it easier to pay down debt. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Page 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. Page 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. Over the last three years, Page Industries recorded free cash flow worth a fulsome 93% of its EBIT, which is stronger than we'd usually expect. That puts it in a very strong position to pay down debt.

Summing Up

We could understand if investors are concerned about Page Industries's liabilities, but we can be reassured by the fact it has has net cash of ₹2.00b. And it impressed us with free cash flow of ₹11b, being 93% of its EBIT. So we don't think Page Industries's use of debt is risky. 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 Page Industries that you should be aware of before investing here.

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.