We Think TV18 Broadcast (NSE:TV18BRDCST) Has A Fair Chunk Of Debt

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.' 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, TV18 Broadcast Limited (NSE:TV18BRDCST) does carry debt. But the more important question is: how much risk is that debt creating?

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. 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. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. The first step when considering a company's debt levels is to consider its cash and debt together.

See our latest analysis for TV18 Broadcast

What Is TV18 Broadcast's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of March 2023 TV18 Broadcast had ₹43.9b of debt, an increase on ₹7.89b, over one year. However, it also had ₹3.11b in cash, and so its net debt is ₹40.7b.

How Strong Is TV18 Broadcast's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that TV18 Broadcast had liabilities of ₹71.8b due within 12 months and liabilities of ₹3.92b due beyond that. On the other hand, it had cash of ₹3.11b and ₹22.6b worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₹50.0b.

This is a mountain of leverage relative to its market capitalization of ₹75.8b. This suggests shareholders would be heavily diluted if the company needed to shore up its balance sheet in a hurry. There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine TV18 Broadcast's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Over 12 months, TV18 Broadcast reported revenue of ₹78b, which is a gain of 39%, 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, TV18 Broadcast still had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost ₹536m at the EBIT level. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any 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 ₹34b 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. For example TV18 Broadcast has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about.

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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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.