Inventurus Knowledge Solutions (NSE:IKS) Could Easily Take On More Debt

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a 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. We can see that Inventurus Knowledge Solutions Limited (NSE:IKS) 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 A Problem?

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, 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 Inventurus Knowledge Solutions's Net Debt?

You can click the graphic below for the historical numbers, but it shows that Inventurus Knowledge Solutions had ₹6.42b of debt in September 2025, down from ₹8.29b, one year before. However, it also had ₹2.29b in cash, and so its net debt is ₹4.13b.

How Strong Is Inventurus Knowledge Solutions' Balance Sheet?

According to the last reported balance sheet, Inventurus Knowledge Solutions had liabilities of ₹6.86b due within 12 months, and liabilities of ₹6.80b due beyond 12 months. Offsetting these obligations, it had cash of ₹2.29b as well as receivables valued at ₹6.21b due within 12 months. So its liabilities total ₹5.16b more than the combination of its cash and short-term receivables.

This state of affairs indicates that Inventurus Knowledge Solutions' balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So it's very unlikely that the ₹279.7b company is short on cash, but still worth keeping an eye on the balance sheet. But either way, Inventurus Knowledge Solutions has virtually no net debt, so it's fair to say it does not have a heavy debt load!

Check out our latest analysis for Inventurus Knowledge Solutions

In order to size up a company's debt relative to its earnings, we calculate its net debt divided by its earnings before interest, tax, depreciation, and amortization (EBITDA) and its earnings before interest and tax (EBIT) divided by its interest expense (its interest cover). This way, we consider both the absolute quantum of the debt, as well as the interest rates paid on it.

Inventurus Knowledge Solutions's net debt is only 0.47 times its EBITDA. And its EBIT easily covers its interest expense, being 13.0 times the size. So we're pretty relaxed about its super-conservative use of debt. In addition to that, we're happy to report that Inventurus Knowledge Solutions has boosted its EBIT by 44%, thus reducing the spectre of future debt repayments. 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 Inventurus Knowledge 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 business needs free cash flow to pay off debt; accounting profits just don't cut it. So we clearly need to look at whether that EBIT is leading to corresponding free cash flow. In the last three years, Inventurus Knowledge Solutions's free cash flow amounted to 48% of its EBIT, less than we'd expect. That's not great, when it comes to paying down debt.

Our View

Happily, Inventurus Knowledge Solutions's impressive interest cover implies it has the upper hand on its debt. And the good news does not stop there, as its EBIT growth rate also supports that impression! It's also worth noting that Inventurus Knowledge Solutions is in the Healthcare Services industry, which is often considered to be quite defensive. Considering this range of factors, it seems to us that Inventurus Knowledge Solutions is quite prudent with its debt, and the risks seem well managed. So we're not worried about the use of a little leverage on the balance sheet. We'd be very excited to see if Inventurus Knowledge Solutions insiders have been snapping up shares. If you are too, then click on this link right now to take a (free) peek at our list of reported insider transactions.

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.