We Think KRBL (NSE:KRBL) Can Stay On Top Of Its Debt

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. We can see that KRBL Limited (NSE:KRBL) 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 assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. 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?

You can click the graphic below for the historical numbers, but it shows that KRBL had ₹3.77b of debt in March 2025, down from ₹5.07b, one year before. However, its balance sheet shows it holds ₹8.13b in cash, so it actually has ₹4.37b net cash.

A Look At KRBL's Liabilities

According to the last reported balance sheet, KRBL had liabilities of ₹8.37b due within 12 months, and liabilities of ₹1.48b due beyond 12 months. Offsetting these obligations, it had cash of ₹8.13b as well as receivables valued at ₹4.68b due within 12 months. So it can boast ₹2.96b more liquid assets than total liabilities.

This surplus suggests that KRBL has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Simply put, the fact that KRBL has more cash than debt is arguably a good indication that it can manage its debt safely.

Check out our latest analysis for KRBL

But the bad news is that KRBL has seen its EBIT plunge 18% in the last twelve months. If that rate of decline in earnings continues, the company could find itself in a tight spot. 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 KRBL will need earnings to service that debt. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. While KRBL has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. Looking at the most recent three years, KRBL recorded free cash flow of 27% of its EBIT, which is weaker than we'd expect. That's not great, when it comes to paying down debt.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that KRBL has net cash of ₹4.37b, as well as more liquid assets than liabilities. So we are not troubled with KRBL's debt use. 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 example KRBL has 2 warning signs (and 1 which is potentially serious) we think you should know about.

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.