Is KRBL (NSE:KRBL) Using Too Much Debt?

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 KRBL Limited (NSE:KRBL) does use debt in its business. But the more important question is: how much risk is that debt creating?

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When Is Debt Dangerous?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. 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. 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 KRBL's Debt?

The image below, which you can click on for greater detail, shows that KRBL had debt of ₹224.7m at the end of September 2025, a reduction from ₹2.07b over a year. But it also has ₹23.1b in cash to offset that, meaning it has ₹22.9b net cash.

How Healthy Is KRBL's Balance Sheet?

The latest balance sheet data shows that KRBL had liabilities of ₹6.12b due within a year, and liabilities of ₹1.63b falling due after that. On the other hand, it had cash of ₹23.1b and ₹5.36b worth of receivables due within a year. So it can boast ₹20.8b more liquid assets than total liabilities.

This excess liquidity suggests that KRBL is taking a careful approach to debt. Due to its strong net asset position, it is not likely to face issues with its lenders. Succinctly put, KRBL boasts net cash, so it's fair to say it does not have a heavy debt load!

Check out our latest analysis for KRBL

In addition to that, we're happy to report that KRBL has boosted its EBIT by 49%, thus reducing the spectre of future debt repayments. There's no doubt that we learn most about debt from the balance sheet. But you can't view debt in total isolation; since KRBL 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.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. KRBL 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. During the last three years, KRBL produced sturdy free cash flow equating to 61% of its EBIT, about what we'd expect. This cold hard cash means it can reduce its debt when it wants to.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that KRBL has net cash of ₹22.9b, as well as more liquid assets than liabilities. And we liked the look of last year's 49% year-on-year EBIT growth. So we don't think KRBL's use of debt is risky. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. For instance, we've identified 2 warning signs for KRBL (1 is concerning) you should be aware of.

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.