Explore Techno Electric & Engineering’s Fair Values from the Community and select yours
Some state volatility, rather than debt, is the best way to consider about risk as an investor, but Warren Buffett famously stated that ‘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 Techno Electric & Engineering Company Limited (NSE:TECHNOE) builds apply of debt. But is this debt a concern to shareholders?
What Risk Does Debt Bring?
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. Part and parcel of capitalism is the process of ‘creative destruction’ where failed businesses are mercilessly liquidated by their bankers. 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. Of course, plenty of companies apply 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 toobtainher.
What Is Techno Electric & Engineering’s Debt?
The image below, which you can click on for greater detail, displays that at March 2025 Techno Electric & Engineering had debt of ₹390.9m, up from none in one year. But on the other hand it also has ₹29.3b in cash, leading to a ₹28.9b net cash position.
A Look At Techno Electric & Engineering’s Liabilities
The latest balance sheet data displays that Techno Electric & Engineering had liabilities of ₹9.48b due within a year, and liabilities of ₹3.69b falling due after that. Offsetting this, it had ₹29.3b in cash and ₹6.77b in receivables that were due within 12 months. So it actually has ₹22.9b more liquid assets than total liabilities.
This short term liquidity is a sign that Techno Electric & Engineering could probably pay off its debt with ease, as its balance sheet is far from stretched. Simply put, the fact that Techno Electric & Engineering has more cash than debt is arguably a good indication that it can manage its debt safely.
Check out our latest analysis for Techno Electric & Engineering
On top of that, Techno Electric & Engineering grew its EBIT by 64% over the last twelve months, and that growth will build it simpler to handle its debt. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if Techno Electric & Engineering can strengthen its balance sheet over time. So if you’re focapplyd on the future you can check out this free report displaying analyst profit forecasts.
Finally, a business necessarys free cash flow to pay off debt; accounting profits just don’t cut it. While Techno Electric & Engineering has net cash on its balance sheet, it’s still worth taking a view at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to support us understand how quickly it is building (or eroding) that cash balance. Over the last three years, Techno Electric & Engineering recorded negative free cash flow, in total. Debt is far more risky for companies with unreliable free cash flow, so shareholders should be hoping that the past expfinishiture will produce free cash flow in the future.
Summing Up
While it is always sensible to investigate a company’s debt, in this case Techno Electric & Engineering has ₹28.9b in net cash and a decent-viewing balance sheet. And we liked the view of last year’s 64% year-on-year EBIT growth. So we don’t consider Techno Electric & Engineering’s apply of debt is risky. 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. Be aware that Techno Electric & Engineering is displaying 1 warning sign in our investment analysis , you should know about…
If, after all that, you’re more interested in a rapid growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.
Valuation is complex, but we’re here to simplify it.
Discover if Techno Electric & Engineering might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividfinishs, insider trades, and its financial condition.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Leave a Reply