Is Drone Destination (NSE:DRONE) Weighed On By Its Debt Load?

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.' 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. Importantly, Drone Destination Limited (NSE:DRONE) does carry debt. But the more important question is: how much risk is that debt creating?

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What Risk Does Debt Bring?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. 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, plenty of companies use debt to fund growth, without any negative consequences. When we think about a company's use of debt, we first look at cash and debt together.

What Is Drone Destination's Debt?

You can click the graphic below for the historical numbers, but it shows that as of March 2025 Drone Destination had ₹159.7m of debt, an increase on ₹39.7m, over one year. But it also has ₹174.8m in cash to offset that, meaning it has ₹15.1m net cash.

A Look At Drone Destination's Liabilities

According to the last reported balance sheet, Drone Destination had liabilities of ₹156.0m due within 12 months, and liabilities of ₹41.4m due beyond 12 months. Offsetting these obligations, it had cash of ₹174.8m as well as receivables valued at ₹179.0m due within 12 months. So it actually has ₹156.5m more liquid assets than total liabilities.

This surplus suggests that Drone Destination has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Simply put, the fact that Drone Destination has more cash than debt is arguably a good indication that it can manage its debt safely. When analysing debt levels, the balance sheet is the obvious place to start. But it is Drone Destination's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

Check out our latest analysis for Drone Destination

In the last year Drone Destination had a loss before interest and tax, and actually shrunk its revenue by 24%, to ₹249m. That makes us nervous, to say the least.

So How Risky Is Drone Destination?

Statistically speaking companies that lose money are riskier than those that make money. And the fact is that over the last twelve months Drone Destination lost money at the earnings before interest and tax (EBIT) line. Indeed, in that time it burnt through ₹207m of cash and made a loss of ₹68m. Given it only has net cash of ₹15.1m, the company may need to raise more capital if it doesn't reach break-even soon. Even though its balance sheet seems sufficiently liquid, debt always makes us a little nervous if a company doesn't produce free cash flow regularly. 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. To that end, you should be aware of the 2 warning signs we've spotted with Drone Destination .

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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.