Does Dabur India (NSE:DABUR) Have A Healthy Balance Sheet?

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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 Dabur India Limited (NSE:DABUR) does use debt in its business. But the real question is whether this debt is making the company risky.

We've discovered 1 warning sign about Dabur India. View them for free.

When Is Debt A Problem?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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, plenty of companies use debt to fund growth, without any negative consequences. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Dabur India's Net Debt?

As you can see below, Dabur India had ₹7.30b of debt at March 2025, down from ₹11.6b a year prior. But on the other hand it also has ₹26.7b in cash, leading to a ₹19.4b net cash position.

How Healthy Is Dabur India's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Dabur India had liabilities of ₹43.2b due within 12 months and liabilities of ₹7.04b due beyond that. Offsetting these obligations, it had cash of ₹26.7b as well as receivables valued at ₹8.91b due within 12 months. So its liabilities total ₹14.7b more than the combination of its cash and short-term receivables.

Having regard to Dabur India's size, it seems that its liquid assets are well balanced with its total liabilities. So while it's hard to imagine that the ₹820.1b company is struggling for cash, we still think it's worth monitoring its balance sheet. While it does have liabilities worth noting, Dabur India also has more cash than debt, so we're pretty confident it can manage its debt safely.

See our latest analysis for Dabur India

Also good is that Dabur India grew its EBIT at 19% 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 Dabur India's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. While Dabur India 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. Over the most recent three years, Dabur India recorded free cash flow worth 61% of its EBIT, which is around normal, given free cash flow excludes interest and tax. This free cash flow puts the company in a good position to pay down debt, when appropriate.

Summing Up

While it is always sensible to look at a company's total liabilities, it is very reassuring that Dabur India has ₹19.4b in net cash. And we liked the look of last year's 19% year-on-year EBIT growth. So we don't think Dabur India's use of debt is risky. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. For example - Dabur India has 1 warning sign we think you should be aware of.

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.