Is Indus Towers (NSE:INDUSTOWER) Using Too Much Debt?

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the 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 Indus Towers Limited (NSE:INDUSTOWER) does use debt in its business. But should shareholders be worried about its use of debt?

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

What Risk Does Debt Bring?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. The first step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does Indus Towers Carry?

As you can see below, Indus Towers had ₹14.8b of debt at September 2025, down from ₹39.5b a year prior. But on the other hand it also has ₹44.5b in cash, leading to a ₹29.7b net cash position.

How Healthy Is Indus Towers' Balance Sheet?

According to the last reported balance sheet, Indus Towers had liabilities of ₹97.0b due within 12 months, and liabilities of ₹213.9b due beyond 12 months. Offsetting these obligations, it had cash of ₹44.5b as well as receivables valued at ₹48.5b due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₹217.9b.

Indus Towers has a very large market capitalization of ₹1.07t, so it could very likely raise cash to ameliorate its balance sheet, if the need arose. But it's clear that we should definitely closely examine whether it can manage its debt without dilution. Despite its noteworthy liabilities, Indus Towers boasts net cash, so it's fair to say it does not have a heavy debt load!

View our latest analysis for Indus Towers

Also positive, Indus Towers grew its EBIT by 25% in the last year, and that should make it easier to pay down debt, going forward. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Indus Towers's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. While Indus Towers 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. During the last three years, Indus Towers produced sturdy free cash flow equating to 70% of its EBIT, about what we'd expect. This cold hard cash means it can reduce its debt when it wants to.

Summing Up

Although Indus Towers's balance sheet isn't particularly strong, due to the total liabilities, it is clearly positive to see that it has net cash of ₹29.7b. And we liked the look of last year's 25% year-on-year EBIT growth. So we don't think Indus Towers's use of debt is risky. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. These risks can be hard to spot. Every company has them, and we've spotted 1 warning sign for Indus Towers you should know about.

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.