Is Gland Pharma (NSE:GLAND) Using Too Much Debt?

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. We can see that Gland Pharma Limited (NSE:GLAND) does use debt in its business. But the real question is whether this debt is making the company risky.

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When Is Debt Dangerous?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. 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. Of course, plenty of companies use debt to fund growth, without any negative consequences. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Gland Pharma's Debt?

You can click the graphic below for the historical numbers, but it shows that Gland Pharma had ₹2.56b of debt in September 2025, down from ₹2.79b, one year before. However, it does have ₹27.0b in cash offsetting this, leading to net cash of ₹24.5b.

How Healthy Is Gland Pharma's Balance Sheet?

According to the last reported balance sheet, Gland Pharma had liabilities of ₹17.1b due within 12 months, and liabilities of ₹5.31b due beyond 12 months. On the other hand, it had cash of ₹27.0b and ₹15.6b worth of receivables due within a year. So it actually has ₹20.3b more liquid assets than total liabilities.

This surplus suggests that Gland Pharma has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Simply put, the fact that Gland Pharma has more cash than debt is arguably a good indication that it can manage its debt safely.

Check out our latest analysis for Gland Pharma

And we also note warmly that Gland Pharma grew its EBIT by 12% last year, making its debt load easier to handle. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Gland Pharma 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, while the tax-man may adore accounting profits, lenders only accept cold hard cash. Gland Pharma 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. In the last three years, Gland Pharma's free cash flow amounted to 49% of its EBIT, less than we'd expect. That's not great, when it comes to paying down debt.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that Gland Pharma has net cash of ₹24.5b, as well as more liquid assets than liabilities. And it also grew its EBIT by 12% over the last year. So is Gland Pharma's debt a risk? It doesn't seem so to us. Above most other metrics, we think its important to track how fast earnings per share is growing, if at all. If you've also come to that realization, you're in luck, because today you can view this interactive graph of Gland Pharma's earnings per share history for free.

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.