We Think AstraZeneca Pharma India (NSE:ASTRAZEN) Can Stay On Top Of Its Debt

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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. Importantly, AstraZeneca Pharma India Limited (NSE:ASTRAZEN) does carry debt. But the more important question is: how much risk is that debt creating?

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What Risk Does Debt Bring?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. When we examine debt levels, we first consider both cash and debt levels, together.

What Is AstraZeneca Pharma India's Net Debt?

As you can see below, at the end of March 2025, AstraZeneca Pharma India had ₹357.3m of debt, up from ₹45.9m a year ago. Click the image for more detail. But on the other hand it also has ₹5.36b in cash, leading to a ₹5.00b net cash position.

A Look At AstraZeneca Pharma India's Liabilities

According to the last reported balance sheet, AstraZeneca Pharma India had liabilities of ₹7.03b due within 12 months, and liabilities of ₹447.7m due beyond 12 months. Offsetting these obligations, it had cash of ₹5.36b as well as receivables valued at ₹2.00b due within 12 months. So these liquid assets roughly match the total liabilities.

This state of affairs indicates that AstraZeneca Pharma India's balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So it's very unlikely that the ₹207.3b company is short on cash, but still worth keeping an eye on the balance sheet. Despite its noteworthy liabilities, AstraZeneca Pharma India boasts net cash, so it's fair to say it does not have a heavy debt load!

Check out our latest analysis for AstraZeneca Pharma India

On top of that, AstraZeneca Pharma India grew its EBIT by 72% over the last twelve months, and that growth will make it easier to handle its debt. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since AstraZeneca Pharma India 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.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. AstraZeneca Pharma India may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. Looking at the most recent three years, AstraZeneca Pharma India recorded free cash flow of 23% of its EBIT, which is weaker than we'd expect. That's not great, when it comes to paying down debt.

Summing Up

We could understand if investors are concerned about AstraZeneca Pharma India's liabilities, but we can be reassured by the fact it has has net cash of ₹5.00b. And we liked the look of last year's 72% year-on-year EBIT growth. So we don't think AstraZeneca Pharma India's use of debt is risky. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. We've identified 1 warning sign with AstraZeneca Pharma India , and understanding them should be part of your investment process.

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.