Does RateGain Travel Technologies (NSE:RATEGAIN) Have A Healthy Balance Sheet?

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. As with many other companies RateGain Travel Technologies Limited (NSE:RATEGAIN) makes use of debt. But is this debt a concern to shareholders?

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What Risk Does Debt Bring?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. When we think about a company's use of debt, we first look at cash and debt together.

What Is RateGain Travel Technologies's Net Debt?

The chart below, which you can click on for greater detail, shows that RateGain Travel Technologies had ₹160.5m in debt in March 2025; about the same as the year before. However, its balance sheet shows it holds ₹11.8b in cash, so it actually has ₹11.6b net cash.

How Healthy Is RateGain Travel Technologies' Balance Sheet?

According to the last reported balance sheet, RateGain Travel Technologies had liabilities of ₹1.93b due within 12 months, and liabilities of ₹286.6m due beyond 12 months. Offsetting this, it had ₹11.8b in cash and ₹2.15b in receivables that were due within 12 months. So it can boast ₹11.7b more liquid assets than total liabilities.

This excess liquidity suggests that RateGain Travel Technologies is taking a careful approach to debt. Because it has plenty of assets, it is unlikely to have trouble with its lenders. Succinctly put, RateGain Travel Technologies boasts net cash, so it's fair to say it does not have a heavy debt load!

View our latest analysis for RateGain Travel Technologies

Another good sign is that RateGain Travel Technologies has been able to increase its EBIT by 22% in twelve months, making it easier to pay down debt. There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if RateGain Travel Technologies can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. RateGain Travel Technologies 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. During the last three years, RateGain Travel Technologies produced sturdy free cash flow equating to 74% of its EBIT, about what we'd expect. This free cash flow puts the company in a good position to pay down debt, when appropriate.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that RateGain Travel Technologies has net cash of ₹11.6b, as well as more liquid assets than liabilities. And it impressed us with free cash flow of ₹1.1b, being 74% of its EBIT. So we don't think RateGain Travel Technologies's use of debt is risky. Over time, share prices tend to follow earnings per share, so if you're interested in RateGain Travel Technologies, you may well want to click here to check an interactive graph of its earnings per share history.

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.