Is New Delhi Television (NSE:NDTV) A Risky Investment?

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' 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 New Delhi Television Limited (NSE:NDTV) makes use of debt. But the real question is whether this debt is making the company risky.

When Is Debt A Problem?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. 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 thing to do when considering how much debt a business uses is to look at its cash and debt together.

Check out our latest analysis for New Delhi Television

What Is New Delhi Television's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of September 2024 New Delhi Television had ₹1.32b of debt, an increase on ₹21.6m, over one year. However, because it has a cash reserve of ₹138.7m, its net debt is less, at about ₹1.18b.

How Strong Is New Delhi Television's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that New Delhi Television had liabilities of ₹2.13b due within 12 months and liabilities of ₹2.23b due beyond that. Offsetting this, it had ₹138.7m in cash and ₹1.08b in receivables that were due within 12 months. So its liabilities total ₹3.14b more than the combination of its cash and short-term receivables.

While this might seem like a lot, it is not so bad since New Delhi Television has a market capitalization of ₹8.99b, and so it could probably strengthen its balance sheet by raising capital if it needed to. However, it is still worthwhile taking a close look at its ability to pay off debt. There's no doubt that we learn most about debt from the balance sheet. But you can't view debt in total isolation; since New Delhi Television will need earnings to service that debt. 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.

Over 12 months, New Delhi Television reported revenue of ₹4.1b, which is a gain of 21%, although it did not report any earnings before interest and tax. With any luck the company will be able to grow its way to profitability.

Caveat Emptor

Despite the top line growth, New Delhi Television still had an earnings before interest and tax (EBIT) loss over the last year. Its EBIT loss was a whopping ₹1.3b. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. However, it doesn't help that it burned through ₹1.7b of cash over the last year. So in short it's a really risky stock. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. Be aware that New Delhi Television is showing 1 warning sign in our investment analysis , you should know about...

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.