Is MosChip Technologies (NSE:MOSCHIP) A Risky Investment?

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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. As with many other companies MosChip Technologies Limited (NSE:MOSCHIP) makes use of debt. But is this debt a concern to shareholders?

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When Is Debt A Problem?

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. 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.

How Much Debt Does MosChip Technologies Carry?

The image below, which you can click on for greater detail, shows that MosChip Technologies had debt of ₹201.3m at the end of September 2025, a reduction from ₹645.8m over a year. However, it does have ₹492.1m in cash offsetting this, leading to net cash of ₹290.8m.

A Look At MosChip Technologies' Liabilities

According to the last reported balance sheet, MosChip Technologies had liabilities of ₹1.22b due within 12 months, and liabilities of ₹485.5m due beyond 12 months. On the other hand, it had cash of ₹492.1m and ₹1.75b worth of receivables due within a year. So it actually has ₹544.3m more liquid assets than total liabilities.

Having regard to MosChip Technologies' size, it seems that its liquid assets are well balanced with its total liabilities. So it's very unlikely that the ₹39.2b company is short on cash, but still worth keeping an eye on the balance sheet. Succinctly put, MosChip Technologies boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for MosChip Technologies

Even more impressive was the fact that MosChip Technologies grew its EBIT by 119% over twelve months. That boost will make it even easier to pay down debt going forward. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since MosChip Technologies will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. While MosChip Technologies 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. Over the last three years, MosChip Technologies actually produced more free cash flow than EBIT. That sort of strong cash conversion gets us as excited as the crowd when the beat drops at a Daft Punk concert.

Summing Up

While it is always sensible to investigate a company's debt, in this case MosChip Technologies has ₹290.8m in net cash and a decent-looking balance sheet. And it impressed us with free cash flow of ₹863m, being 132% of its EBIT. So is MosChip Technologies's debt a risk? It doesn't seem so to us. 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. Case in point: We've spotted 2 warning signs for MosChip Technologies you should be aware of, and 1 of them doesn't sit too well with us.

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.