Wise Travel India (NSE:WTICAB) Has A Pretty 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.' 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. Importantly, Wise Travel India Limited (NSE:WTICAB) does carry debt. But is this debt a concern to shareholders?

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. 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, 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.

View our latest analysis for Wise Travel India

What Is Wise Travel India's Debt?

You can click the graphic below for the historical numbers, but it shows that as of September 2024 Wise Travel India had ₹536.2m of debt, an increase on ₹272.8m, over one year. But on the other hand it also has ₹821.9m in cash, leading to a ₹285.7m net cash position.

A Look At Wise Travel India's Liabilities

We can see from the most recent balance sheet that Wise Travel India had liabilities of ₹994.3m falling due within a year, and liabilities of ₹361.5m due beyond that. On the other hand, it had cash of ₹821.9m and ₹1.19b worth of receivables due within a year. So it actually has ₹652.0m more liquid assets than total liabilities.

It's good to see that Wise Travel India has plenty of liquidity on its balance sheet, suggesting conservative management of liabilities. Due to its strong net asset position, it is not likely to face issues with its lenders. Succinctly put, Wise Travel India boasts net cash, so it's fair to say it does not have a heavy debt load!

Also positive, Wise Travel India grew its EBIT by 28% 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 you can't view debt in total isolation; since Wise Travel India will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. While Wise Travel India 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, Wise Travel India burned a lot of cash. While that may be a result of expenditure for growth, it does make the debt far more risky.

Summing Up

While it is always sensible to investigate a company's debt, in this case Wise Travel India has ₹285.7m in net cash and a decent-looking balance sheet. And it impressed us with its EBIT growth of 28% over the last year. So we are not troubled with Wise Travel India's debt use. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. For instance, we've identified 3 warning signs for Wise Travel India (1 is concerning) you should be aware of.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.