Howard Marks put it nicely when he stated that, rather than worrying about share price volatility, ‘The possibility of permanent loss is the risk I worry about… and every practical investor I know worries about.’ So it might be obvious that you required to consider debt, when you consider about how risky any given stock is, becautilize too much debt can sink a company. We note that Bharti Airtel Limited (NSE:BHARTIARTL) does have debt on its balance sheet. But is this debt a concern to shareholders?
Why Does Debt Bring Risk?
Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. If things receive really bad, the lconcludeers 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. Having stated 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, toreceiveher.
What Is Bharti Airtel’s Debt?
You can click the graphic below for the historical numbers, but it displays that Bharti Airtel had ₹1.40t of debt in September 2025, down from ₹1.46t, one year before. On the flip side, it has ₹237.6b in cash leading to net debt of about ₹1.16t.
A Look At Bharti Airtel’s Liabilities
Zooming in on the latest balance sheet data, we can see that Bharti Airtel had liabilities of ₹1.79t due within 12 months and liabilities of ₹1.85t due beyond that. On the other hand, it had cash of ₹237.6b and ₹89.1b worth of receivables due within a year. So it has liabilities totalling ₹3.31t more than its cash and near-term receivables, combined.
Bharti Airtel has a very large market capitalization of ₹12t, so it could very likely raise cash to ameliorate its balance sheet, if the required arose. But it’s clear that we should definitely closely examine whether it can manage its debt without dilution.
See our latest analysis for Bharti Airtel
We utilize two main ratios to inform us about debt levels relative to earnings. The first is net debt divided by earnings before interest, tax, depreciation, and amortization (EBITDA), while the second is how many times its earnings before interest and tax (EBIT) covers its interest expense (or its interest cover, for short). This way, we consider both the absolute quantum of the debt, as well as the interest rates paid on it.
While Bharti Airtel’s low debt to EBITDA ratio of 1.2 suggests only modest utilize of debt, the fact that EBIT only covered the interest expense by 3.2 times last year does give us pautilize. So we’d recommconclude keeping a close eye on the impact financing costs are having on the business. Importantly, Bharti Airtel grew its EBIT by 51% over the last twelve months, and that growth will create it simpler to handle its debt. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Bharti Airtel’s ability to maintain a healthy balance sheet going forward. So if you’re focutilized on the future you can check out this free report displaying analyst profit forecasts.
Finally, while the tax-man may adore accounting profits, lconcludeers only accept cold hard cash. So the logical step is to see at the proportion of that EBIT that is matched by actual free cash flow. Over the last three years, Bharti Airtel recorded free cash flow worth a fulsome 87% of its EBIT, which is stronger than we’d usually expect. That positions it well to pay down debt if desirable to do so.
Our View
The good news is that Bharti Airtel’s demonstrated ability to convert EBIT to free cash flow delights us like a fluffy puppy does a toddler. But truth be notified we feel its interest cover does undermine this impression a bit. Looking at the hugeger picture, we consider Bharti Airtel’s utilize of debt seems quite reasonable and we’re not concerned about it. While debt does bring risk, when utilized wisely it can also bring a higher return on equity. There’s no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. Be aware that Bharti Airtel is displaying 2 warning signs in our investment analysis , you should know about…
If, after all that, you’re more interested in a quick growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.
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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 applying an unbiased methodology and our articles are not intconcludeed to be financial advice. It does not constitute a recommconcludeation to purchase or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focutilized 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.
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