Is Panacea Biotec (NSE:PANACEABIO) A Risky Investment?

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.' 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. As with many other companies Panacea Biotec Limited (NSE:PANACEABIO) makes use of debt. But the more important question is: how much risk is that debt creating?

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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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. 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.

What Is Panacea Biotec's Debt?

The image below, which you can click on for greater detail, shows that at September 2025 Panacea Biotec had debt of ₹229.0m, up from ₹215.7m in one year. However, its balance sheet shows it holds ₹848.7m in cash, so it actually has ₹619.7m net cash.

How Healthy Is Panacea Biotec's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Panacea Biotec had liabilities of ₹3.45b due within 12 months and liabilities of ₹873.6m due beyond that. Offsetting this, it had ₹848.7m in cash and ₹791.9m in receivables that were due within 12 months. So its liabilities total ₹2.68b more than the combination of its cash and short-term receivables.

Given Panacea Biotec has a market capitalization of ₹21.8b, it's hard to believe these liabilities pose much threat. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. Despite its noteworthy liabilities, Panacea Biotec boasts net cash, so it's fair to say it does not have a heavy debt load! The balance sheet is clearly the area to focus on when you are analysing debt. But it is Panacea Biotec's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

View our latest analysis for Panacea Biotec

In the last year Panacea Biotec wasn't profitable at an EBIT level, but managed to grow its revenue by 10%, to ₹6.1b. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

So How Risky Is Panacea Biotec?

Statistically speaking companies that lose money are riskier than those that make money. And in the last year Panacea Biotec had an earnings before interest and tax (EBIT) loss, truth be told. And over the same period it saw negative free cash outflow of ₹975m and booked a ₹72m accounting loss. With only ₹619.7m on the balance sheet, it would appear that its going to need to raise capital again soon. Overall, we'd say the stock is a bit risky, and we're usually very cautious until we see positive free cash flow. 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. For example - Panacea Biotec has 1 warning sign we think you should be aware of.

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.