Mahindra Holidays & Resorts India (NSE:MHRIL) Seems To Use Debt Quite Sensibly

Warren Buffett famously said, '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. We can see that Mahindra Holidays & Resorts India Limited (NSE:MHRIL) does use debt in its business. But the real question is whether this debt is making the company risky.

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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. 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, 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.

What Is Mahindra Holidays & Resorts India's Debt?

You can click the graphic below for the historical numbers, but it shows that as of March 2025 Mahindra Holidays & Resorts India had ₹9.87b of debt, an increase on ₹8.84b, over one year. But it also has ₹10.00b in cash to offset that, meaning it has ₹123.2m net cash.

How Strong Is Mahindra Holidays & Resorts India's Balance Sheet?

According to the last reported balance sheet, Mahindra Holidays & Resorts India had liabilities of ₹19.0b due within 12 months, and liabilities of ₹79.2b due beyond 12 months. Offsetting this, it had ₹10.00b in cash and ₹11.4b in receivables that were due within 12 months. So its liabilities total ₹76.8b more than the combination of its cash and short-term receivables.

Given this deficit is actually higher than the company's market capitalization of ₹67.7b, we think shareholders really should watch Mahindra Holidays & Resorts India's debt levels, like a parent watching their child ride a bike for the first time. In the scenario where the company had to clean up its balance sheet quickly, it seems likely shareholders would suffer extensive dilution. Mahindra Holidays & Resorts India boasts net cash, so it's fair to say it does not have a heavy debt load, even if it does have very significant liabilities, in total.

See our latest analysis for Mahindra Holidays & Resorts India

If Mahindra Holidays & Resorts India can keep growing EBIT at last year's rate of 14% over the last year, then it will find its debt load easier to manage. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Mahindra Holidays & Resorts India'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. Mahindra Holidays & Resorts India 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, Mahindra Holidays & Resorts India actually produced more free cash flow than EBIT. There's nothing better than incoming cash when it comes to staying in your lenders' good graces.

Summing Up

While Mahindra Holidays & Resorts India does have more liabilities than liquid assets, it also has net cash of ₹123.2m. And it impressed us with free cash flow of ₹3.0b, being 166% of its EBIT. So we don't have any problem with Mahindra Holidays & Resorts India's use of debt. Of course, we wouldn't say no to the extra confidence that we'd gain if we knew that Mahindra Holidays & Resorts India insiders have been buying shares: if you're on the same wavelength, you can find out if insiders are buying by clicking this link.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.