Does Gravita India (NSE:GRAVITA) Have A 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.' 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. We can see that Gravita India Limited (NSE:GRAVITA) does use debt in its business. But should shareholders be worried about its use of debt?

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

Why Does Debt Bring Risk?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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 said 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, together.

What Is Gravita India's Debt?

As you can see below, Gravita India had ₹4.41b of debt at September 2025, down from ₹5.57b a year prior. But on the other hand it also has ₹8.60b in cash, leading to a ₹4.18b net cash position.

A Look At Gravita India's Liabilities

According to the last reported balance sheet, Gravita India had liabilities of ₹4.23b due within 12 months, and liabilities of ₹1.83b due beyond 12 months. Offsetting these obligations, it had cash of ₹8.60b as well as receivables valued at ₹2.81b due within 12 months. So it actually has ₹5.35b more liquid assets than total liabilities.

This surplus suggests that Gravita India has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, Gravita India boasts net cash, so it's fair to say it does not have a heavy debt load!

Check out our latest analysis for Gravita India

On top of that, Gravita India grew its EBIT by 31% over the last twelve months, and that growth will make it easier to handle its debt. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Gravita India can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. Gravita India 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 last three years, Gravita India 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 expenditure will produce free cash flow in the future.

Summing Up

While it is always sensible to investigate a company's debt, in this case Gravita India has ₹4.18b in net cash and a decent-looking balance sheet. And it impressed us with its EBIT growth of 31% over the last year. So we are not troubled with Gravita India's debt use. 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. For example, we've discovered 2 warning signs for Gravita India (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

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.

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 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.