Sampann Utpadan India (NSE:SAMPANN) Is Carrying A Fair Bit 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. Importantly, Sampann Utpadan India Limited (NSE:SAMPANN) does carry debt. But the real question is whether this debt is making the company risky.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

When Is Debt Dangerous?

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. 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, debt can be an important tool in businesses, particularly capital heavy businesses. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Sampann Utpadan India's Net Debt?

The chart below, which you can click on for greater detail, shows that Sampann Utpadan India had ₹959.0m in debt in March 2025; about the same as the year before. And it doesn't have much cash, so its net debt is about the same.

How Strong Is Sampann Utpadan India's Balance Sheet?

The latest balance sheet data shows that Sampann Utpadan India had liabilities of ₹197.9m due within a year, and liabilities of ₹844.7m falling due after that. Offsetting this, it had ₹8.10m in cash and ₹116.3m in receivables that were due within 12 months. So its liabilities total ₹918.2m more than the combination of its cash and short-term receivables.

This deficit is considerable relative to its market capitalization of ₹1.37b, so it does suggest shareholders should keep an eye on Sampann Utpadan India's use of debt. This suggests shareholders would be heavily diluted if the company needed to shore up its balance sheet in a hurry. When analysing debt levels, the balance sheet is the obvious place to start. But it is Sampann Utpadan India's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

Check out our latest analysis for Sampann Utpadan India

In the last year Sampann Utpadan India wasn't profitable at an EBIT level, but managed to grow its revenue by 30%, to ₹926m. Shareholders probably have their fingers crossed that it can grow its way to profits.

Caveat Emptor

Even though Sampann Utpadan India managed to grow its top line quite deftly, the cold hard truth is that it is losing money on the EBIT line. Indeed, it lost ₹17m at the EBIT level. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. However, it doesn't help that it burned through ₹70m of cash over the last year. So in short it's a really risky stock. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. For example, we've discovered 4 warning signs for Sampann Utpadan India (1 shouldn't be ignored!) that you should be aware of before investing here.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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.