Here's Why Tirupati Forge (NSE:TIRUPATIFL) Can Manage Its Debt Responsibly

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.' 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. As with many other companies Tirupati Forge Limited (NSE:TIRUPATIFL) makes use of debt. 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 frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. 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.

What Is Tirupati Forge's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of March 2025 Tirupati Forge had ₹176.8m of debt, an increase on ₹110.7m, over one year. But it also has ₹331.3m in cash to offset that, meaning it has ₹154.5m net cash.

How Strong Is Tirupati Forge's Balance Sheet?

We can see from the most recent balance sheet that Tirupati Forge had liabilities of ₹222.5m falling due within a year, and liabilities of ₹166.2m due beyond that. On the other hand, it had cash of ₹331.3m and ₹173.8m worth of receivables due within a year. So it can boast ₹116.4m more liquid assets than total liabilities.

This surplus suggests that Tirupati Forge has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Simply put, the fact that Tirupati Forge has more cash than debt is arguably a good indication that it can manage its debt safely.

View our latest analysis for Tirupati Forge

And we also note warmly that Tirupati Forge grew its EBIT by 16% last year, making its debt load easier to handle. When analysing debt levels, the balance sheet is the obvious place to start. But it is Tirupati Forge's earnings that will influence how the balance sheet holds up in the future. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. While Tirupati Forge 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. During the last three years, Tirupati Forge burned a lot of cash. While that may be a result of expenditure for growth, it does make the debt far more risky.

Summing Up

While it is always sensible to investigate a company's debt, in this case Tirupati Forge has ₹154.5m in net cash and a decent-looking balance sheet. And we liked the look of last year's 16% year-on-year EBIT growth. So we don't have any problem with Tirupati Forge's use of debt. 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. Case in point: We've spotted 2 warning signs for Tirupati Forge you should be aware of, and 1 of them is significant.

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.