Is Sical Logistics (NSE:SICALLOG) 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.' 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. We can see that Sical Logistics Limited (NSE:SICALLOG) does use debt in its business. But should shareholders be worried about its use of debt?

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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. 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.

What Is Sical Logistics's Debt?

As you can see below, at the end of March 2025, Sical Logistics had ₹5.32b of debt, up from ₹4.97b a year ago. Click the image for more detail. However, it also had ₹865.1m in cash, and so its net debt is ₹4.45b.

A Look At Sical Logistics' Liabilities

The latest balance sheet data shows that Sical Logistics had liabilities of ₹3.88b due within a year, and liabilities of ₹3.40b falling due after that. On the other hand, it had cash of ₹865.1m and ₹721.3m worth of receivables due within a year. So its liabilities total ₹5.69b more than the combination of its cash and short-term receivables.

This deficit is considerable relative to its market capitalization of ₹6.97b, so it does suggest shareholders should keep an eye on Sical Logistics' use of debt. This suggests shareholders would be heavily diluted if the company needed to shore up its balance sheet in a hurry. There's no doubt that we learn most about debt from the balance sheet. But it is Sical Logistics's earnings that will influence how the balance sheet holds up in the future. 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.

View our latest analysis for Sical Logistics

In the last year Sical Logistics's revenue was pretty flat, and it made a negative EBIT. While that's not too bad, we'd prefer see growth.

Caveat Emptor

Importantly, Sical Logistics had an earnings before interest and tax (EBIT) loss over the last year. To be specific the EBIT loss came in at ₹162m. 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 ₹642m of cash over the last year. So in short it's a really risky stock. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. For instance, we've identified 2 warning signs for Sical Logistics 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.