Drone Destination (NSE:DRONE) Is Carrying A Fair Bit Of Debt

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. We can see that Drone Destination Limited (NSE:DRONE) does use debt in its business. But should shareholders be worried about its use of debt?

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Why Does Debt Bring Risk?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Drone Destination's Net Debt?

The image below, which you can click on for greater detail, shows that at September 2025 Drone Destination had debt of ₹341.6m, up from ₹128.7m in one year. However, it does have ₹283.2m in cash offsetting this, leading to net debt of about ₹58.4m.

How Healthy Is Drone Destination's Balance Sheet?

According to the last reported balance sheet, Drone Destination had liabilities of ₹276.5m due within 12 months, and liabilities of ₹104.6m due beyond 12 months. Offsetting this, it had ₹283.2m in cash and ₹263.5m in receivables that were due within 12 months. So it can boast ₹165.6m more liquid assets than total liabilities.

This short term liquidity is a sign that Drone Destination could probably pay off its debt with ease, as its balance sheet is far from stretched. The balance sheet is clearly the area to focus on when you are analysing debt. But you can't view debt in total isolation; since Drone Destination will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

View our latest analysis for Drone Destination

Over 12 months, Drone Destination made a loss at the EBIT level, and saw its revenue drop to ₹271m, which is a fall of 35%. To be frank that doesn't bode well.

Caveat Emptor

While Drone Destination's falling revenue is about as heartwarming as a wet blanket, arguably its earnings before interest and tax (EBIT) loss is even less appealing. To be specific the EBIT loss came in at ₹67m. Looking on the brighter side, the business has adequate liquid assets, which give it time to grow and develop before its debt becomes a near-term issue. Still, we'd be more encouraged to study the business in depth if it already had some free cash flow. This one is a bit too risky for our liking. 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. For example Drone Destination has 4 warning signs (and 1 which is concerning) we think you should know about.

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.