These 4 Measures Indicate That Shree Pushkar Chemicals & Fertilisers (NSE:SHREEPUSHK) 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 note that Shree Pushkar Chemicals & Fertilisers Limited (NSE:SHREEPUSHK) does have debt on its balance sheet. But is this debt a concern to shareholders?

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What Risk Does Debt Bring?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. 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 Shree Pushkar Chemicals & Fertilisers Carry?

The image below, which you can click on for greater detail, shows that Shree Pushkar Chemicals & Fertilisers had debt of ₹991.5m at the end of March 2025, a reduction from ₹1.08b over a year. But it also has ₹1.10b in cash to offset that, meaning it has ₹104.9m net cash.

How Healthy Is Shree Pushkar Chemicals & Fertilisers' Balance Sheet?

According to the last reported balance sheet, Shree Pushkar Chemicals & Fertilisers had liabilities of ₹2.83b due within 12 months, and liabilities of ₹447.2m due beyond 12 months. On the other hand, it had cash of ₹1.10b and ₹1.74b worth of receivables due within a year. So it has liabilities totalling ₹439.5m more than its cash and near-term receivables, combined.

Of course, Shree Pushkar Chemicals & Fertilisers has a market capitalization of ₹11.2b, so these liabilities are probably manageable. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. Despite its noteworthy liabilities, Shree Pushkar Chemicals & Fertilisers boasts net cash, so it's fair to say it does not have a heavy debt load!

Check out our latest analysis for Shree Pushkar Chemicals & Fertilisers

On top of that, Shree Pushkar Chemicals & Fertilisers grew its EBIT by 57% over the last twelve months, and that growth will make it easier to handle its debt. The balance sheet is clearly the area to focus on when you are analysing debt. But you can't view debt in total isolation; since Shree Pushkar Chemicals & Fertilisers 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.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. Shree Pushkar Chemicals & Fertilisers 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. Considering the last three years, Shree Pushkar Chemicals & Fertilisers actually recorded a cash outflow, overall. Debt is usually more expensive, and almost always more risky in the hands of a company with negative free cash flow. Shareholders ought to hope for an improvement.

Summing Up

While it is always sensible to look at a company's total liabilities, it is very reassuring that Shree Pushkar Chemicals & Fertilisers has ₹104.9m in net cash. And it impressed us with its EBIT growth of 57% over the last year. So we don't have any problem with Shree Pushkar Chemicals & Fertilisers's use of debt. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. Case in point: We've spotted 2 warning signs for Shree Pushkar Chemicals & Fertilisers you should be aware of.

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.