Berger Paints India (NSE:BERGEPAINT) Has A Pretty Healthy Balance Sheet

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. Importantly, Berger Paints India Limited (NSE:BERGEPAINT) does carry debt. But is this debt a concern to shareholders?

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Why Does Debt Bring Risk?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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, plenty of companies use debt to fund growth, without any negative consequences. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Berger Paints India's Net Debt?

The image below, which you can click on for greater detail, shows that Berger Paints India had debt of ₹1.86b at the end of September 2025, a reduction from ₹2.51b over a year. But on the other hand it also has ₹7.89b in cash, leading to a ₹6.03b net cash position.

How Healthy Is Berger Paints India's Balance Sheet?

We can see from the most recent balance sheet that Berger Paints India had liabilities of ₹25.7b falling due within a year, and liabilities of ₹5.91b due beyond that. Offsetting these obligations, it had cash of ₹7.89b as well as receivables valued at ₹18.5b due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₹5.27b.

This state of affairs indicates that Berger Paints India's balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So while it's hard to imagine that the ₹650.9b company is struggling for cash, we still think it's worth monitoring its balance sheet. Despite its noteworthy liabilities, Berger Paints India boasts net cash, so it's fair to say it does not have a heavy debt load!

View our latest analysis for Berger Paints India

But the other side of the story is that Berger Paints India saw its EBIT decline by 2.1% over the last year. If earnings continue to decline at that rate the company may have increasing difficulty managing its debt load. There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if Berger Paints India 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. Berger Paints India 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. During the last three years, Berger Paints India produced sturdy free cash flow equating to 73% of its EBIT, about what we'd expect. This cold hard cash means it can reduce its debt when it wants to.

Summing Up

While it is always sensible to look at a company's total liabilities, it is very reassuring that Berger Paints India has ₹6.03b in net cash. The cherry on top was that in converted 73% of that EBIT to free cash flow, bringing in ₹9.0b. So is Berger Paints India's debt a risk? It doesn't seem so to us. Over time, share prices tend to follow earnings per share, so if you're interested in Berger Paints India, you may well want to click here to check an interactive graph of its earnings per share history.

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.