Is Bhageria Industries (NSE:BHAGERIA) Using Too Much Debt?

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. As with many other companies Bhageria Industries Limited (NSE:BHAGERIA) makes use of debt. But the more important question is: how much risk is that debt creating?

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What Risk Does Debt Bring?

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 usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Bhageria Industries's Debt?

As you can see below, Bhageria Industries had ₹449.9m of debt at March 2025, down from ₹472.1m a year prior. However, it does have ₹947.3m in cash offsetting this, leading to net cash of ₹497.4m.

A Look At Bhageria Industries' Liabilities

According to the last reported balance sheet, Bhageria Industries had liabilities of ₹1.29b due within 12 months, and liabilities of ₹474.3m due beyond 12 months. Offsetting these obligations, it had cash of ₹947.3m as well as receivables valued at ₹1.92b due within 12 months. So it actually has ₹1.10b more liquid assets than total liabilities.

This short term liquidity is a sign that Bhageria Industries could probably pay off its debt with ease, as its balance sheet is far from stretched. Succinctly put, Bhageria Industries boasts net cash, so it's fair to say it does not have a heavy debt load!

Check out our latest analysis for Bhageria Industries

Even more impressive was the fact that Bhageria Industries grew its EBIT by 319% over twelve months. That boost will make it even easier to pay down debt going forward. When analysing debt levels, the balance sheet is the obvious place to start. But it is Bhageria Industries'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.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. Bhageria Industries 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. Looking at the most recent three years, Bhageria Industries recorded free cash flow of 43% of its EBIT, which is weaker than we'd expect. That's not great, when it comes to paying down debt.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that Bhageria Industries has net cash of ₹497.4m, as well as more liquid assets than liabilities. And it impressed us with its EBIT growth of 319% over the last year. So is Bhageria Industries's debt a risk? It doesn't seem so to us. 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. For example Bhageria Industries has 2 warning signs (and 1 which can't be ignored) we think 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.