Is Delhivery (NSE:DELHIVERY) Weighed On By Its Debt Load?

Legendary fund manager Li Lu (who Charlie Munger backed) once said, '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 Delhivery Limited (NSE:DELHIVERY) makes use of debt. But the more important question is: how much risk is that debt creating?

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 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. 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. When we think about a company's use of debt, we first look at cash and debt together.

Check out our latest analysis for Delhivery

What Is Delhivery's Debt?

As you can see below, Delhivery had ₹794.6m of debt at September 2024, down from ₹1.70b a year prior. But it also has ₹26.9b in cash to offset that, meaning it has ₹26.1b net cash.

How Strong Is Delhivery's Balance Sheet?

We can see from the most recent balance sheet that Delhivery had liabilities of ₹14.6b falling due within a year, and liabilities of ₹11.5b due beyond that. Offsetting these obligations, it had cash of ₹26.9b as well as receivables valued at ₹14.0b due within 12 months. So it actually has ₹14.8b more liquid assets than total liabilities.

This surplus suggests that Delhivery has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, Delhivery boasts net cash, so it's fair to say it does not have a heavy debt load! There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine Delhivery's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Over 12 months, Delhivery reported revenue of ₹86b, which is a gain of 14%, although it did not report any earnings before interest and tax. We usually like to see faster growth from unprofitable companies, but each to their own.

So How Risky Is Delhivery?

Although Delhivery had an earnings before interest and tax (EBIT) loss over the last twelve months, it made a statutory profit of ₹78m. So taking that on face value, and considering the cash, we don't think its very risky in the near term. We'll feel more comfortable with the stock once EBIT is positive, given the lacklustre revenue growth. 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. For instance, we've identified 1 warning sign for Delhivery that you should be aware of.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.