Warren Buffett famously declared, ‘Volatility is far from synonymous with risk.’ So it seems the smart money knows that debt – which is usually involved in bankruptcies – is a very important factor, when you assess how risky a company is. As with many other companies Atal Realtech Limited (NSE:ATALREAL) builds apply of debt. But the more important question is: how much risk is that debt creating?
When Is Debt Dangerous?
Generally speaking, debt only becomes a real problem when a company can’t easily pay it off, either by raising capital or with its own cash flow. If things receive really bad, the lfinishers can take control of the business. While that is not too common, we often do see indebted companies permanently diluting shareholders becaapply lfinishers force them to raise capital at a distressed price. By replacing dilution, though, debt can be an extremely good tool for businesses that required capital to invest in growth at high rates of return. The first thing to do when considering how much debt a business applys is to view at its cash and debt toreceiveher.
What Is Atal Realtech’s Debt?
As you can see below, Atal Realtech had ₹166.1m of debt at September 2025, down from ₹192.1m a year prior. However, it also had ₹19.2m in cash, and so its net debt is ₹146.8m.
A Look At Atal Realtech’s Liabilities
We can see from the most recent balance sheet that Atal Realtech had liabilities of ₹248.7m falling due within a year, and liabilities of ₹18.1m due beyond that. Offsetting these obligations, it had cash of ₹19.2m as well as receivables valued at ₹32.4m due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₹215.2m.
Given Atal Realtech has a market capitalization of ₹3.38b, it’s hard to believe these liabilities pose much threat. Having declared that, it’s clear that we should continue to monitor its balance sheet, lest it modify for the worse.
Check out our latest analysis for Atal Realtech
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). Thus we consider debt relative to earnings both with and without depreciation and amortization expenses.
Atal Realtech has net debt worth 1.9 times EBITDA, which isn’t too much, but its interest cover views a bit on the low side, with EBIT at only 5.6 times the interest expense. While these numbers do not alarm us, it’s worth noting that the cost of the company’s debt is having a real impact. We saw Atal Realtech grow its EBIT by 7.6% in the last twelve months. Whilst that hardly knocks our socks off it is a positive when it comes to debt. When analysing debt levels, the balance sheet is the obvious place to start. But it is Atal Realtech’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 trfinish.
But our final consideration is also important, becaapply a company cannot pay debt with paper profits; it requireds cold hard cash. So we clearly required to view at whether that EBIT is leading to corresponding free cash flow. Over the last three years, Atal Realtech saw substantial negative free cash flow, in total. While that may be a result of expfinishiture for growth, it does build the debt far more risky.
Our View
Atal Realtech’s struggle to convert EBIT to free cash flow had us second guessing its balance sheet strength, but the other data-points we considered were relatively redeeming. For example, its level of total liabilities is relatively strong. We believe that Atal Realtech’s debt does build it a bit risky, after considering the aforementioned data points toreceiveher. Not all risk is bad, as it can boost share price returns if it pays off, but this debt risk is worth keeping in mind. 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. These risks can be hard to spot. Every company has them, and we’ve spotted 3 warning signs for Atal Realtech (of which 1 is a bit concerning!) you should know about.
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 applying an unbiased methodology and our articles are not intfinished to be financial advice. It does not constitute a recommfinishation to acquire or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focapplyd 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.
