Would Borosil Renewables (NSE:BORORENEW) Be Better Off With Less 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.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. We can see that Borosil Renewables Limited (NSE:BORORENEW) does use debt in its business. But is this debt a concern to shareholders?

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Why Does Debt Bring Risk?

Debt assists a business until the business has trouble paying it off, either with new capital or with free 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. Of course, plenty of companies use debt to fund growth, without any negative consequences. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Borosil Renewables's Debt?

As you can see below, Borosil Renewables had ₹2.51b of debt at March 2025, down from ₹5.71b a year prior. However, because it has a cash reserve of ₹892.9m, its net debt is less, at about ₹1.61b.

A Look At Borosil Renewables' Liabilities

We can see from the most recent balance sheet that Borosil Renewables had liabilities of ₹2.62b falling due within a year, and liabilities of ₹1.93b due beyond that. Offsetting this, it had ₹892.9m in cash and ₹1.33b in receivables that were due within 12 months. So it has liabilities totalling ₹2.33b more than its cash and near-term receivables, combined.

Given Borosil Renewables has a market capitalization of ₹70.5b, 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. When analysing debt levels, the balance sheet is the obvious place to start. But it is Borosil Renewables'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.

Check out our latest analysis for Borosil Renewables

In the last year Borosil Renewables wasn't profitable at an EBIT level, but managed to grow its revenue by 10%, to ₹15b. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

Caveat Emptor

Over the last twelve months Borosil Renewables produced an earnings before interest and tax (EBIT) loss. To be specific the EBIT loss came in at ₹426m. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. However, it doesn't help that it burned through ₹94m of cash over the last year. So to be blunt we think it is risky. 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. Be aware that Borosil Renewables is showing 1 warning sign in our investment analysis , you should know about...

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