Poly Medicure (NSE:POLYMED) Seems To Use Debt Quite Sensibly

Legendary fund manager Li Lu (who Charlie Munger backed) once said, '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 Poly Medicure Limited (NSE:POLYMED) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

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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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. 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 thing to do when considering how much debt a business uses is to look at its cash and debt together.

How Much Debt Does Poly Medicure Carry?

The image below, which you can click on for greater detail, shows that at September 2025 Poly Medicure had debt of ₹2.36b, up from ₹1.58b in one year. But on the other hand it also has ₹11.0b in cash, leading to a ₹8.60b net cash position.

How Strong Is Poly Medicure's Balance Sheet?

We can see from the most recent balance sheet that Poly Medicure had liabilities of ₹5.01b falling due within a year, and liabilities of ₹1.54b due beyond that. On the other hand, it had cash of ₹11.0b and ₹4.26b worth of receivables due within a year. So it can boast ₹8.68b more liquid assets than total liabilities.

This surplus suggests that Poly Medicure has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Simply put, the fact that Poly Medicure has more cash than debt is arguably a good indication that it can manage its debt safely.

See our latest analysis for Poly Medicure

The good news is that Poly Medicure has increased its EBIT by 8.9% over twelve months, which should ease any concerns about debt repayment. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Poly Medicure can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. Poly Medicure 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. Considering the last three years, Poly Medicure actually recorded a cash outflow, overall. 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 Poly Medicure has ₹8.60b in net cash and a decent-looking balance sheet. And it also grew its EBIT by 8.9% over the last year. So we don't have any problem with Poly Medicure's use of debt. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. These risks can be hard to spot. Every company has them, and we've spotted 1 warning sign for Poly Medicure you should know about.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.