Here's Why Global Health (NSE:MEDANTA) 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.' 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. As with many other companies Global Health Limited (NSE:MEDANTA) makes use of debt. But the real question is whether this debt is making the company risky.

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When Is Debt A Problem?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. If things get really bad, the lenders can take control of the business. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. 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.

How Much Debt Does Global Health Carry?

As you can see below, at the end of September 2025, Global Health had ₹5.27b of debt, up from ₹3.02b a year ago. Click the image for more detail. But on the other hand it also has ₹12.2b in cash, leading to a ₹6.93b net cash position.

How Healthy Is Global Health's Balance Sheet?

The latest balance sheet data shows that Global Health had liabilities of ₹7.21b due within a year, and liabilities of ₹9.79b falling due after that. On the other hand, it had cash of ₹12.2b and ₹3.65b worth of receivables due within a year. So it has liabilities totalling ₹1.14b more than its cash and near-term receivables, combined.

Having regard to Global Health's size, it seems that its liquid assets are well balanced with its total liabilities. So it's very unlikely that the ₹315.5b company is short on cash, but still worth keeping an eye on the balance sheet. Despite its noteworthy liabilities, Global Health boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for Global Health

Also good is that Global Health grew its EBIT at 16% over the last year, further increasing its ability to manage debt. There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine Global Health'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, while the tax-man may adore accounting profits, lenders only accept cold hard cash. While Global Health 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, Global Health recorded free cash flow of 30% of its EBIT, which is weaker than we'd expect. That's not great, when it comes to paying down debt.

Summing Up

While it is always sensible to look at a company's total liabilities, it is very reassuring that Global Health has ₹6.93b in net cash. And we liked the look of last year's 16% year-on-year EBIT growth. So we don't think Global Health's use of debt is risky. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. These risks can be hard to spot. Every company has them, and we've spotted 1 warning sign for Global Health you should know about.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.