Bharat Rasayan (NSE:BHARATRAS) Has A Pretty Healthy Balance Sheet

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a 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 note that Bharat Rasayan Limited (NSE:BHARATRAS) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

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When Is Debt A Problem?

Debt assists a business until the business has trouble paying it off, either with new capital or with free 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 because lenders force them to raise capital at a distressed price. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Bharat Rasayan's Debt?

You can click the graphic below for the historical numbers, but it shows that as of September 2025 Bharat Rasayan had ₹904.4m of debt, an increase on ₹630.6m, over one year. However, it does have ₹2.79b in cash offsetting this, leading to net cash of ₹1.89b.

A Look At Bharat Rasayan's Liabilities

We can see from the most recent balance sheet that Bharat Rasayan had liabilities of ₹2.41b falling due within a year, and liabilities of ₹182.1m due beyond that. Offsetting these obligations, it had cash of ₹2.79b as well as receivables valued at ₹4.83b due within 12 months. So it can boast ₹5.04b more liquid assets than total liabilities.

This short term liquidity is a sign that Bharat Rasayan could probably pay off its debt with ease, as its balance sheet is far from stretched. Simply put, the fact that Bharat Rasayan has more cash than debt is arguably a good indication that it can manage its debt safely.

Check out our latest analysis for Bharat Rasayan

Bharat Rasayan's EBIT was pretty flat over the last year, but that shouldn't be an issue given the it doesn't have a lot of debt. The balance sheet is clearly the area to focus on when you are analysing debt. But you can't view debt in total isolation; since Bharat Rasayan 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, while the tax-man may adore accounting profits, lenders only accept cold hard cash. Bharat Rasayan may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. Over the most recent three years, Bharat Rasayan recorded free cash flow worth 57% of its EBIT, which is around normal, given free cash flow excludes interest and tax. This free cash flow puts the company in a good position to pay down debt, when appropriate.

Summing Up

While it is always sensible to investigate a company's debt, in this case Bharat Rasayan has ₹1.89b in net cash and a decent-looking balance sheet. So we don't think Bharat Rasayan's use of debt is risky. 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. Be aware that Bharat Rasayan is showing 1 warning sign in our investment analysis , 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 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.