Sai Silks (Kalamandir) (NSE:KALAMANDIR) Has A Somewhat Strained Balance Sheet

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' 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. As with many other companies Sai Silks (Kalamandir) Limited (NSE:KALAMANDIR) makes use of debt. But should shareholders be worried about its use of debt?

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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. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Sai Silks (Kalamandir)'s Net Debt?

You can click the graphic below for the historical numbers, but it shows that Sai Silks (Kalamandir) had ₹1.67b of debt in March 2025, down from ₹2.58b, one year before. However, it does have ₹2.95b in cash offsetting this, leading to net cash of ₹1.28b.

How Strong Is Sai Silks (Kalamandir)'s Balance Sheet?

We can see from the most recent balance sheet that Sai Silks (Kalamandir) had liabilities of ₹2.51b falling due within a year, and liabilities of ₹2.58b due beyond that. Offsetting this, it had ₹2.95b in cash and ₹282.5m in receivables that were due within 12 months. So it has liabilities totalling ₹1.86b more than its cash and near-term receivables, combined.

Given Sai Silks (Kalamandir) has a market capitalization of ₹23.4b, it's hard to believe these liabilities pose much threat. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. While it does have liabilities worth noting, Sai Silks (Kalamandir) also has more cash than debt, so we're pretty confident it can manage its debt safely.

View our latest analysis for Sai Silks (Kalamandir)

Unfortunately, Sai Silks (Kalamandir) saw its EBIT slide 3.1% in the last twelve months. If earnings continue on that decline then managing that debt will be difficult like delivering hot soup on a unicycle. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Sai Silks (Kalamandir)'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.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. While Sai Silks (Kalamandir) 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. Considering the last three years, Sai Silks (Kalamandir) actually recorded a cash outflow, overall. Debt is usually more expensive, and almost always more risky in the hands of a company with negative free cash flow. Shareholders ought to hope for an improvement.

Summing Up

While it is always sensible to look at a company's total liabilities, it is very reassuring that Sai Silks (Kalamandir) has ₹1.28b in net cash. So while Sai Silks (Kalamandir) does not have a great balance sheet, it's certainly not too bad. In light of our reservations about the company's balance sheet, it seems sensible to check if insiders have been selling shares recently.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.