We Think Zee Entertainment Enterprises (NSE:ZEEL) Can Manage Its Debt With Ease

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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 note that Zee Entertainment Enterprises Limited (NSE:ZEEL) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

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Why Does Debt Bring Risk?

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. 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. 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 thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Zee Entertainment Enterprises's Debt?

As you can see below, at the end of September 2025, Zee Entertainment Enterprises had ₹1.67b of debt, up from ₹1.55b a year ago. Click the image for more detail. However, its balance sheet shows it holds ₹21.1b in cash, so it actually has ₹19.5b net cash.

How Healthy Is Zee Entertainment Enterprises' Balance Sheet?

We can see from the most recent balance sheet that Zee Entertainment Enterprises had liabilities of ₹17.2b falling due within a year, and liabilities of ₹3.74b due beyond that. Offsetting these obligations, it had cash of ₹21.1b as well as receivables valued at ₹18.0b due within 12 months. So it can boast ₹18.2b more liquid assets than total liabilities.

This surplus suggests that Zee Entertainment Enterprises is using debt in a way that is appears to be both safe and conservative. Because it has plenty of assets, it is unlikely to have trouble with its lenders. Succinctly put, Zee Entertainment Enterprises boasts net cash, so it's fair to say it does not have a heavy debt load!

View our latest analysis for Zee Entertainment Enterprises

Fortunately, Zee Entertainment Enterprises grew its EBIT by 6.7% in the last year, making that debt load look even more manageable. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if Zee Entertainment Enterprises can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. While Zee Entertainment Enterprises 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, Zee Entertainment Enterprises produced sturdy free cash flow equating to 72% 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 Zee Entertainment Enterprises has ₹19.5b in net cash and a decent-looking balance sheet. The cherry on top was that in converted 72% of that EBIT to free cash flow, bringing in ₹6.1b. So is Zee Entertainment Enterprises's debt a risk? It doesn't seem so to us. When analysing debt levels, the balance sheet is the obvious place to start. 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 1 warning sign for Zee Entertainment Enterprises you should know about.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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.