We Think Remus Pharmaceuticals (NSE:REMUS) Can Stay On Top Of Its Debt

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the 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. Importantly, Remus Pharmaceuticals Limited (NSE:REMUS) does carry debt. But the more important question is: how much risk is that debt creating?

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What Risk Does Debt Bring?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Remus Pharmaceuticals's Net Debt?

The image below, which you can click on for greater detail, shows that Remus Pharmaceuticals had debt of ₹141.2m at the end of September 2025, a reduction from ₹208.5m over a year. However, it does have ₹209.4m in cash offsetting this, leading to net cash of ₹68.2m.

A Look At Remus Pharmaceuticals' Liabilities

We can see from the most recent balance sheet that Remus Pharmaceuticals had liabilities of ₹1.95b falling due within a year, and liabilities of ₹353.1m due beyond that. On the other hand, it had cash of ₹209.4m and ₹1.61b worth of receivables due within a year. So its liabilities total ₹487.7m more than the combination of its cash and short-term receivables.

Of course, Remus Pharmaceuticals has a market capitalization of ₹7.33b, so these liabilities are probably manageable. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. Despite its noteworthy liabilities, Remus Pharmaceuticals boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for Remus Pharmaceuticals

Also positive, Remus Pharmaceuticals grew its EBIT by 25% in the last year, and that should make it easier to pay down debt, going forward. There's no doubt that we learn most about debt from the balance sheet. But it is Remus Pharmaceuticals's earnings that will influence how the balance sheet holds up in the future. 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. Remus Pharmaceuticals 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, Remus Pharmaceuticals reported free cash flow worth 2.9% of its EBIT, which is really quite low. For us, cash conversion that low sparks a little paranoia about is ability to extinguish debt.

Summing Up

We could understand if investors are concerned about Remus Pharmaceuticals's liabilities, but we can be reassured by the fact it has has net cash of ₹68.2m. And we liked the look of last year's 25% year-on-year EBIT growth. So we don't have any problem with Remus Pharmaceuticals's use of debt. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. Case in point: We've spotted 2 warning signs for Remus Pharmaceuticals you should be aware of.

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.