Stock Analysis

Affle 3i (NSE:AFFLE) Could Easily Take On More Debt

NSEI:AFFLE
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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. Importantly, Affle 3i Limited (NSE:AFFLE) does carry debt. But should shareholders be worried about its use of debt?

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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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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, 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 Affle 3i's Net Debt?

The image below, which you can click on for greater detail, shows that Affle 3i had debt of ₹772.2m at the end of March 2025, a reduction from ₹1.78b over a year. However, its balance sheet shows it holds ₹15.3b in cash, so it actually has ₹14.5b net cash.

debt-equity-history-analysis
NSEI:AFFLE Debt to Equity History July 11th 2025

A Look At Affle 3i's Liabilities

We can see from the most recent balance sheet that Affle 3i had liabilities of ₹6.29b falling due within a year, and liabilities of ₹466.8m due beyond that. On the other hand, it had cash of ₹15.3b and ₹5.54b worth of receivables due within a year. So it can boast ₹14.0b more liquid assets than total liabilities.

This short term liquidity is a sign that Affle 3i could probably pay off its debt with ease, as its balance sheet is far from stretched. Succinctly put, Affle 3i boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for Affle 3i

In addition to that, we're happy to report that Affle 3i has boosted its EBIT by 34%, thus reducing the spectre of future debt repayments. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Affle 3i can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. While Affle 3i 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, Affle 3i produced sturdy free cash flow equating to 59% of its EBIT, about what we'd expect. This free cash flow puts the company in a good position to pay down debt, when appropriate.

Summing Up

While it is always sensible to investigate a company's debt, in this case Affle 3i has ₹14.5b in net cash and a decent-looking balance sheet. And we liked the look of last year's 34% year-on-year EBIT growth. So we don't think Affle 3i's use of debt is risky. Over time, share prices tend to follow earnings per share, so if you're interested in Affle 3i, you may well want to click here to check an interactive graph of its earnings per share history.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.

About NSEI:AFFLE

Affle 3i

Provides mobile advertisement services through information technology and software development services for mobiles in India and internationally.

Flawless balance sheet with solid track record.

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