We Think Himadri Speciality Chemical (NSE:HSCL) Can Manage Its Debt With Ease

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. We note that Himadri Speciality Chemical Limited (NSE:HSCL) does have debt on its balance sheet. But is this debt a concern to shareholders?

We check all companies for important risks. See what we found for Himadri Speciality Chemical in our free report.

What Risk Does Debt Bring?

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 usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does Himadri Speciality Chemical Carry?

As you can see below, Himadri Speciality Chemical had ₹3.09b of debt at March 2025, down from ₹6.00b a year prior. However, its balance sheet shows it holds ₹6.76b in cash, so it actually has ₹3.67b net cash.

How Strong Is Himadri Speciality Chemical's Balance Sheet?

The latest balance sheet data shows that Himadri Speciality Chemical had liabilities of ₹6.05b due within a year, and liabilities of ₹2.80b falling due after that. Offsetting these obligations, it had cash of ₹6.76b as well as receivables valued at ₹6.35b due within 12 months. So it actually has ₹4.26b more liquid assets than total liabilities.

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

Check out our latest analysis for Himadri Speciality Chemical

In addition to that, we're happy to report that Himadri Speciality Chemical has boosted its EBIT by 38%, thus reducing the spectre of future debt repayments. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine Himadri Speciality Chemical's ability to maintain a healthy balance sheet going forward. 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 Himadri Speciality Chemical 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. In the last three years, Himadri Speciality Chemical's free cash flow amounted to 34% of its EBIT, less than we'd expect. That weak cash conversion makes it more difficult to handle indebtedness.

Summing Up

While it is always sensible to investigate a company's debt, in this case Himadri Speciality Chemical has ₹3.67b in net cash and a decent-looking balance sheet. And we liked the look of last year's 38% year-on-year EBIT growth. So we don't think Himadri Speciality Chemical's use of debt is risky. Over time, share prices tend to follow earnings per share, so if you're interested in Himadri Speciality Chemical, you may well want to click here to check an interactive graph of its earnings per share history.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.