Digikore Studios (NSE:DIGIKORE) Is Carrying A Fair Bit Of Debt

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 seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We can see that Digikore Studios Limited (NSE:DIGIKORE) does use debt in its business. But is this debt a concern to shareholders?

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When Is Debt Dangerous?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Digikore Studios's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of September 2025 Digikore Studios had ₹410.3m of debt, an increase on ₹252.6m, over one year. Net debt is about the same, since the it doesn't have much cash.

A Look At Digikore Studios' Liabilities

According to the last reported balance sheet, Digikore Studios had liabilities of ₹490.2m due within 12 months, and liabilities of ₹50.4m due beyond 12 months. On the other hand, it had cash of ₹897.0k and ₹515.3m worth of receivables due within a year. So its liabilities total ₹24.4m more than the combination of its cash and short-term receivables.

Of course, Digikore Studios has a market capitalization of ₹1.04b, 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. When analysing debt levels, the balance sheet is the obvious place to start. But it is Digikore Studios'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.

View our latest analysis for Digikore Studios

Over 12 months, Digikore Studios made a loss at the EBIT level, and saw its revenue drop to ₹480m, which is a fall of 3.6%. That's not what we would hope to see.

Caveat Emptor

Over the last twelve months Digikore Studios produced an earnings before interest and tax (EBIT) loss. To be specific the EBIT loss came in at ₹40m. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. So we think its balance sheet is a little strained, though not beyond repair. Another cause for caution is that is bled ₹140m in negative free cash flow over the last twelve months. So in short it's a really risky stock. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. These risks can be hard to spot. Every company has them, and we've spotted 4 warning signs for Digikore Studios (of which 3 are significant!) you should know about.

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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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.