These 4 Measures Indicate That Tirupati Forge (NSE:TIRUPATIFL) Is Using Debt Extensively

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, Tirupati Forge Limited (NSE:TIRUPATIFL) does carry debt. But the more important question is: how much risk is that debt creating?

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What Risk Does Debt Bring?

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. If things get really bad, the lenders can take control of the business. 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, plenty of companies use debt to fund growth, without any negative consequences. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Tirupati Forge's Net Debt?

The image below, which you can click on for greater detail, shows that at September 2025 Tirupati Forge had debt of ₹176.8m, up from ₹113.8m in one year. But it also has ₹199.8m in cash to offset that, meaning it has ₹22.9m net cash.

A Look At Tirupati Forge's Liabilities

We can see from the most recent balance sheet that Tirupati Forge had liabilities of ₹302.3m falling due within a year, and liabilities of ₹170.2m due beyond that. Offsetting this, it had ₹199.8m in cash and ₹217.9m in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₹54.9m.

Having regard to Tirupati Forge's size, it seems that its liquid assets are well balanced with its total liabilities. So while it's hard to imagine that the ₹3.95b company is struggling for cash, we still think it's worth monitoring its balance sheet. While it does have liabilities worth noting, Tirupati Forge also has more cash than debt, so we're pretty confident it can manage its debt safely.

View our latest analysis for Tirupati Forge

It is just as well that Tirupati Forge's load is not too heavy, because its EBIT was down 48% over the last year. When it comes to paying off debt, falling earnings are no more useful than sugary sodas are for your health. 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. Tirupati Forge 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. Over the last three years, Tirupati Forge saw substantial negative free cash flow, in total. 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 it is always sensible to look at a company's total liabilities, it is very reassuring that Tirupati Forge has ₹22.9m in net cash. So while Tirupati Forge does not have a great balance sheet, it's certainly not too bad. 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. We've identified 4 warning signs with Tirupati Forge (at least 1 which can't be ignored) , and understanding them should be part of your investment process.

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.

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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.