Does Noida Toll Bridge (NSE:NOIDATOLL) Have A Healthy Balance Sheet?

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 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 Noida Toll Bridge Company Limited (NSE:NOIDATOLL) makes use of debt. But should shareholders be worried about its use of debt?

When Is Debt Dangerous?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. If things get really bad, the lenders can take control of the business. 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. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. When we think about a company's use of debt, we first look at cash and debt together.

View our latest analysis for Noida Toll Bridge

What Is Noida Toll Bridge's Debt?

As you can see below, Noida Toll Bridge had ₹667.1m of debt, at March 2024, which is about the same as the year before. You can click the chart for greater detail. However, it does have ₹405.1m in cash offsetting this, leading to net debt of about ₹262.0m.

How Strong Is Noida Toll Bridge's Balance Sheet?

We can see from the most recent balance sheet that Noida Toll Bridge had liabilities of ₹1.24b falling due within a year, and liabilities of ₹191.5m due beyond that. On the other hand, it had cash of ₹405.1m and ₹28.2m worth of receivables due within a year. So its liabilities total ₹998.1m more than the combination of its cash and short-term receivables.

Noida Toll Bridge has a market capitalization of ₹2.77b, so it could very likely raise cash to ameliorate its balance sheet, if the need arose. However, it is still worthwhile taking a close look at its ability to pay off debt. 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 Noida Toll Bridge 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.

Over 12 months, Noida Toll Bridge reported revenue of ₹276m, which is a gain of 34%, although it did not report any earnings before interest and tax. With any luck the company will be able to grow its way to profitability.

Caveat Emptor

Despite the top line growth, Noida Toll Bridge still had an earnings before interest and tax (EBIT) loss over the last year. Its EBIT loss was a whopping ₹310m. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. So we think its balance sheet is a little strained, though not beyond repair. However, it doesn't help that it burned through ₹42m of cash over the last year. So suffice it to say we do consider the stock to be risky. 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 2 warning signs for Noida Toll Bridge that you should be aware of.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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.