These 4 Measures Indicate That Rishabh Instruments (NSE:RISHABH) Is Using Debt Reasonably Well

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.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We can see that Rishabh Instruments Limited (NSE:RISHABH) does use debt in its business. But is this debt a concern to shareholders?

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When Is Debt Dangerous?

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. 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 Rishabh Instruments Carry?

You can click the graphic below for the historical numbers, but it shows that as of March 2025 Rishabh Instruments had ₹958.7m of debt, an increase on ₹548.4m, over one year. However, its balance sheet shows it holds ₹1.98b in cash, so it actually has ₹1.02b net cash.

How Strong Is Rishabh Instruments' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Rishabh Instruments had liabilities of ₹1.79b due within 12 months and liabilities of ₹927.2m due beyond that. Offsetting these obligations, it had cash of ₹1.98b as well as receivables valued at ₹1.43b due within 12 months. So it actually has ₹690.4m more liquid assets than total liabilities.

This short term liquidity is a sign that Rishabh Instruments could probably pay off its debt with ease, as its balance sheet is far from stretched. Simply put, the fact that Rishabh Instruments has more cash than debt is arguably a good indication that it can manage its debt safely.

See our latest analysis for Rishabh Instruments

The modesty of its debt load may become crucial for Rishabh Instruments if management cannot prevent a repeat of the 51% cut to EBIT over the last year. When a company sees its earnings tank, it can sometimes find its relationships with its lenders turn sour. The balance sheet is clearly the area to focus on when you are analysing debt. But you can't view debt in total isolation; since Rishabh Instruments 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.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. While Rishabh Instruments 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, Rishabh Instruments recorded negative free cash flow, in total. 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 investigate a company's debt, in this case Rishabh Instruments has ₹1.02b in net cash and a decent-looking balance sheet. So we are not troubled with Rishabh Instruments's debt use. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. For example Rishabh Instruments has 3 warning signs (and 1 which can't be ignored) we think you should know about.

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.