Stock Analysis

Here's Why Styrenix Performance Materials (NSE:STYRENIX) Can Manage Its Debt Responsibly

NSEI:STYRENIX
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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. Importantly, Styrenix Performance Materials Limited (NSE:STYRENIX) does carry debt. But the more important question is: how much risk is that debt creating?

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Why Does Debt Bring Risk?

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 common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we examine debt levels, we first consider both cash and debt levels, together.

How Much Debt Does Styrenix Performance Materials Carry?

The image below, which you can click on for greater detail, shows that at March 2025 Styrenix Performance Materials had debt of ₹2.06b, up from ₹99.1m in one year. On the flip side, it has ₹1.11b in cash leading to net debt of about ₹947.1m.

debt-equity-history-analysis
NSEI:STYRENIX Debt to Equity History July 30th 2025

How Strong Is Styrenix Performance Materials' Balance Sheet?

We can see from the most recent balance sheet that Styrenix Performance Materials had liabilities of ₹6.61b falling due within a year, and liabilities of ₹4.63b due beyond that. Offsetting these obligations, it had cash of ₹1.11b as well as receivables valued at ₹4.40b due within 12 months. So it has liabilities totalling ₹5.72b more than its cash and near-term receivables, combined.

Since publicly traded Styrenix Performance Materials shares are worth a total of ₹50.7b, it seems unlikely that this level of liabilities would be a major threat. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time.

See our latest analysis for Styrenix Performance Materials

We measure a company's debt load relative to its earnings power by looking at its net debt divided by its earnings before interest, tax, depreciation, and amortization (EBITDA) and by calculating how easily its earnings before interest and tax (EBIT) cover its interest expense (interest cover). Thus we consider debt relative to earnings both with and without depreciation and amortization expenses.

Styrenix Performance Materials has a low net debt to EBITDA ratio of only 0.27. And its EBIT covers its interest expense a whopping 52.6 times over. So we're pretty relaxed about its super-conservative use of debt. In addition to that, we're happy to report that Styrenix Performance Materials has boosted its EBIT by 31%, thus reducing the spectre of future debt repayments. There's no doubt that we learn most about debt from the balance sheet. But it is Styrenix Performance Materials'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.

Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. So it's worth checking how much of that EBIT is backed by free cash flow. In the last three years, Styrenix Performance Materials created free cash flow amounting to 6.3% of its EBIT, an uninspiring performance. That limp level of cash conversion undermines its ability to manage and pay down debt.

Our View

Styrenix Performance Materials's interest cover suggests it can handle its debt as easily as Cristiano Ronaldo could score a goal against an under 14's goalkeeper. But the stark truth is that we are concerned by its conversion of EBIT to free cash flow. When we consider the range of factors above, it looks like Styrenix Performance Materials is pretty sensible with its use of debt. That means they are taking on a bit more risk, in the hope of boosting shareholder returns. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. For instance, we've identified 2 warning signs for Styrenix Performance Materials (1 is potentially serious) you should be aware of.

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.

About NSEI:STYRENIX

Styrenix Performance Materials

Engages in the manufacture, trading, and sale of engineering thermoplastics in India.

Flawless balance sheet with solid track record and pays a dividend.

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