Markolines Pavement Technologies (NSE:MARKOLINES) Seems To Use Debt Quite Sensibly

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. As with many other companies Markolines Pavement Technologies Limited (NSE:MARKOLINES) makes use of debt. But is this debt a concern to shareholders?

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Why Does Debt Bring Risk?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Markolines Pavement Technologies's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of September 2025 Markolines Pavement Technologies had ₹604.9m of debt, an increase on ₹558.0m, over one year. Net debt is about the same, since the it doesn't have much cash.

How Healthy Is Markolines Pavement Technologies' Balance Sheet?

According to the last reported balance sheet, Markolines Pavement Technologies had liabilities of ₹990.8m due within 12 months, and liabilities of ₹90.4m due beyond 12 months. Offsetting these obligations, it had cash of ₹7.35m as well as receivables valued at ₹1.06b due within 12 months. So these liquid assets roughly match the total liabilities.

Having regard to Markolines Pavement Technologies' size, it seems that its liquid assets are well balanced with its total liabilities. So it's very unlikely that the ₹3.76b company is short on cash, but still worth keeping an eye on the balance sheet.

See our latest analysis for Markolines Pavement Technologies

In order to size up a company's debt relative to its earnings, we calculate its net debt divided by its earnings before interest, tax, depreciation, and amortization (EBITDA) and its earnings before interest and tax (EBIT) divided by its interest expense (its interest cover). This way, we consider both the absolute quantum of the debt, as well as the interest rates paid on it.

Markolines Pavement Technologies's net debt is only 1.3 times its EBITDA. And its EBIT easily covers its interest expense, being 11.3 times the size. So we're pretty relaxed about its super-conservative use of debt. In addition to that, we're happy to report that Markolines Pavement Technologies has boosted its EBIT by 45%, thus reducing the spectre of future debt repayments. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Markolines Pavement Technologies 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, a company can only pay off debt with cold hard cash, not accounting profits. So we always check how much of that EBIT is translated into free cash flow. Over the last three years, Markolines Pavement Technologies saw substantial negative free cash flow, in total. While that may be a result of expenditure for growth, it does make the debt far more risky.

Our View

Markolines Pavement Technologies's EBIT growth rate suggests it can handle its debt as easily as Cristiano Ronaldo could score a goal against an under 14's goalkeeper. But we must concede we find its conversion of EBIT to free cash flow has the opposite effect. We would also note that Infrastructure industry companies like Markolines Pavement Technologies commonly do use debt without problems. Taking all this data into account, it seems to us that Markolines Pavement Technologies takes a pretty sensible approach to debt. While that brings some risk, it can also enhance returns for shareholders. 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. We've identified 1 warning sign with Markolines Pavement Technologies , and understanding them should be part of your investment process.

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.