These 4 Measures Indicate That PTC Industries (NSE:PTCIL) Is Using Debt Reasonably Well

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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 can see that PTC Industries Limited (NSE:PTCIL) does use debt in its business. But should shareholders be worried about its use of debt?

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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. 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, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together.

How Much Debt Does PTC Industries Carry?

As you can see below, PTC Industries had ₹608.3m of debt at March 2025, down from ₹1.82b a year prior. However, it does have ₹4.04b in cash offsetting this, leading to net cash of ₹3.43b.

How Healthy Is PTC Industries' Balance Sheet?

We can see from the most recent balance sheet that PTC Industries had liabilities of ₹1.22b falling due within a year, and liabilities of ₹752.1m due beyond that. On the other hand, it had cash of ₹4.04b and ₹1.56b worth of receivables due within a year. So it can boast ₹3.63b more liquid assets than total liabilities.

This state of affairs indicates that PTC Industries' 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 ₹223.9b company is struggling for cash, we still think it's worth monitoring its balance sheet. Simply put, the fact that PTC Industries has more cash than debt is arguably a good indication that it can manage its debt safely.

View our latest analysis for PTC Industries

Fortunately, PTC Industries grew its EBIT by 4.2% in the last year, making that debt load look even more manageable. There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine PTC Industries's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. PTC 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. During the last three years, PTC Industries burned a lot of cash. While investors are no doubt expecting a reversal of that situation in due course, it clearly does mean its use of debt is more risky.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that PTC Industries has net cash of ₹3.43b, as well as more liquid assets than liabilities. On top of that, it increased its EBIT by 4.2% in the last twelve months. So we don't have any problem with PTC Industries's use of debt. Over time, share prices tend to follow earnings per share, so if you're interested in PTC Industries, 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.

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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.