Is Optiemus Infracom (NSE:OPTIEMUS) Using Too Much 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.' 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. We can see that Optiemus Infracom Limited (NSE:OPTIEMUS) does use debt in its business. But is this debt a concern to shareholders?

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Why Does Debt Bring Risk?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Of course, plenty of companies use debt to fund growth, without any negative consequences. When we think about a company's use of debt, we first look at cash and debt together.

What Is Optiemus Infracom's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of March 2025 Optiemus Infracom had ₹1.29b of debt, an increase on ₹1.09b, over one year. But on the other hand it also has ₹1.46b in cash, leading to a ₹164.6m net cash position.

How Healthy Is Optiemus Infracom's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Optiemus Infracom had liabilities of ₹7.20b due within 12 months and liabilities of ₹1.38b due beyond that. On the other hand, it had cash of ₹1.46b and ₹6.05b worth of receivables due within a year. So its liabilities total ₹1.07b more than the combination of its cash and short-term receivables.

This state of affairs indicates that Optiemus Infracom's balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So it's very unlikely that the ₹60.0b company is short on cash, but still worth keeping an eye on the balance sheet. While it does have liabilities worth noting, Optiemus Infracom also has more cash than debt, so we're pretty confident it can manage its debt safely.

See our latest analysis for Optiemus Infracom

It is well worth noting that Optiemus Infracom's EBIT shot up like bamboo after rain, gaining 37% in the last twelve months. That'll make it easier to manage its debt. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Optiemus Infracom will need earnings to service that debt. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. Optiemus Infracom 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. Over the last three years, Optiemus Infracom saw substantial negative free cash flow, in total. While investors are no doubt expecting a reversal of that situation in due course, it clearly does mean its use of debt is more risky.

Summing Up

While it is always sensible to look at a company's total liabilities, it is very reassuring that Optiemus Infracom has ₹164.6m in net cash. And we liked the look of last year's 37% year-on-year EBIT growth. So we are not troubled with Optiemus Infracom's debt use. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. Case in point: We've spotted 1 warning sign for Optiemus Infracom you should be aware of.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.