Is Global Surfaces (NSE:GSLSU) A Risky Investment?

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. We note that Global Surfaces Limited (NSE:GSLSU) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

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When Is Debt Dangerous?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. Of course, plenty of companies use debt to fund growth, without any negative consequences. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

How Much Debt Does Global Surfaces Carry?

The image below, which you can click on for greater detail, shows that at March 2025 Global Surfaces had debt of ₹1.52b, up from ₹983.3m in one year. On the flip side, it has ₹73.6m in cash leading to net debt of about ₹1.45b.

A Look At Global Surfaces' Liabilities

According to the last reported balance sheet, Global Surfaces had liabilities of ₹1.53b due within 12 months, and liabilities of ₹1.01b due beyond 12 months. Offsetting this, it had ₹73.6m in cash and ₹1.28b in receivables that were due within 12 months. So it has liabilities totalling ₹1.18b more than its cash and near-term receivables, combined.

While this might seem like a lot, it is not so bad since Global Surfaces has a market capitalization of ₹5.65b, and so it could probably strengthen its balance sheet by raising capital if it needed to. But we definitely want to keep our eyes open to indications that its debt is bringing too much risk. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Global Surfaces will need earnings to service that debt. 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.

See our latest analysis for Global Surfaces

In the last year Global Surfaces had a loss before interest and tax, and actually shrunk its revenue by 7.8%, to ₹2.1b. We would much prefer see growth.

Caveat Emptor

Over the last twelve months Global Surfaces produced an earnings before interest and tax (EBIT) loss. To be specific the EBIT loss came in at ₹167m. 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 ₹359m in negative free cash flow over the last twelve months. So suffice it to say we consider the stock very risky. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. We've identified 4 warning signs with Global Surfaces (at least 2 which are a bit unpleasant) , and understanding them should be part of your investment process.

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.