APL Apollo Tubes (NSE:APLAPOLLO) Seems To Use Debt Quite Sensibly

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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. As with many other companies APL Apollo Tubes Limited (NSE:APLAPOLLO) makes use of debt. But the more important question is: how much risk is that debt creating?

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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 common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does APL Apollo Tubes Carry?

You can click the graphic below for the historical numbers, but it shows that APL Apollo Tubes had ₹6.34b of debt in March 2025, down from ₹11.4b, one year before. However, it does have ₹9.47b in cash offsetting this, leading to net cash of ₹3.12b.

How Healthy Is APL Apollo Tubes' Balance Sheet?

According to the last reported balance sheet, APL Apollo Tubes had liabilities of ₹26.3b due within 12 months, and liabilities of ₹7.57b due beyond 12 months. Offsetting this, it had ₹9.47b in cash and ₹5.06b in receivables that were due within 12 months. So it has liabilities totalling ₹19.3b more than its cash and near-term receivables, combined.

Given APL Apollo Tubes has a market capitalization of ₹466.2b, it's hard to believe these liabilities pose much threat. 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, APL Apollo Tubes boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for APL Apollo Tubes

The good news is that APL Apollo Tubes has increased its EBIT by 5.5% over twelve months, which should ease any concerns about debt repayment. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if APL Apollo Tubes can strengthen its balance sheet over time. 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. While APL Apollo Tubes 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 last three years, APL Apollo Tubes reported free cash flow worth 19% of its EBIT, which is really quite low. That limp level of cash conversion undermines its ability to manage and pay down debt.

Summing Up

While it is always sensible to look at a company's total liabilities, it is very reassuring that APL Apollo Tubes has ₹3.12b in net cash. On top of that, it increased its EBIT by 5.5% in the last twelve months. So we don't have any problem with APL Apollo Tubes's use of debt. There's no doubt that we learn most about debt from the balance sheet. 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 APL Apollo Tubes you should know about.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.