Global Surfaces (NSE:GSLSU) Is Making Moderate Use Of Debt

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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 Global Surfaces Limited (NSE:GSLSU) 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. If things get really bad, the lenders can take control of the business. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Global Surfaces's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of September 2025 Global Surfaces had ₹1.63b of debt, an increase on ₹1.08b, over one year. However, because it has a cash reserve of ₹108.8m, its net debt is less, at about ₹1.52b.

How Healthy Is Global Surfaces' Balance Sheet?

According to the last reported balance sheet, Global Surfaces had liabilities of ₹1.75b due within 12 months, and liabilities of ₹997.7m due beyond 12 months. On the other hand, it had cash of ₹108.8m and ₹1.30b worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₹1.34b.

Global Surfaces has a market capitalization of ₹4.78b, so it could very likely raise cash to ameliorate its balance sheet, if the need arose. However, it is still worthwhile taking a close look at its ability to pay off debt. There's no doubt that we learn most about debt from the balance sheet. But you can't view debt in total isolation; since Global Surfaces will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

View our latest analysis for Global Surfaces

Over 12 months, Global Surfaces made a loss at the EBIT level, and saw its revenue drop to ₹2.3b, which is a fall of 8.2%. We would much prefer see growth.

Caveat Emptor

Over the last twelve months Global Surfaces produced an earnings before interest and tax (EBIT) loss. Indeed, it lost ₹212m at the EBIT level. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. Another cause for caution is that is bled ₹258m in negative free cash flow over the last twelve months. So suffice it to say we consider the stock very risky. 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. Case in point: We've spotted 4 warning signs for Global Surfaces you should be aware of, and 3 of them shouldn't be ignored.

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.