Here's Why Entero Healthcare Solutions (NSE:ENTERO) Can Manage Its Debt Responsibly

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a 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 note that Entero Healthcare Solutions Limited (NSE:ENTERO) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

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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. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Entero Healthcare Solutions's Net Debt?

As you can see below, at the end of March 2025, Entero Healthcare Solutions had ₹2.99b of debt, up from ₹2.76b a year ago. Click the image for more detail. But on the other hand it also has ₹3.18b in cash, leading to a ₹191.7m net cash position.

How Healthy Is Entero Healthcare Solutions' Balance Sheet?

According to the last reported balance sheet, Entero Healthcare Solutions had liabilities of ₹8.45b due within 12 months, and liabilities of ₹871.4m due beyond 12 months. On the other hand, it had cash of ₹3.18b and ₹10.1b worth of receivables due within a year. So it can boast ₹3.99b more liquid assets than total liabilities.

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

Check out our latest analysis for Entero Healthcare Solutions

Importantly, Entero Healthcare Solutions grew its EBIT by 62% over the last twelve months, and that growth will make it easier to handle its debt. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine Entero Healthcare Solutions'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. Entero Healthcare Solutions 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, Entero Healthcare Solutions saw substantial negative free cash flow, in total. While investors are no doubt expecting a reversal of that situation in due course, it clearly does mean its use of debt is more risky.

Summing Up

While it is always sensible to investigate a company's debt, in this case Entero Healthcare Solutions has ₹191.7m in net cash and a decent-looking balance sheet. And it impressed us with its EBIT growth of 62% over the last year. So we are not troubled with Entero Healthcare Solutions's debt use. Above most other metrics, we think its important to track how fast earnings per share is growing, if at all. If you've also come to that realization, you're in luck, because today you can view this interactive graph of Entero Healthcare Solutions's earnings per share history for free.

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.