TBO Tek (NSE:TBOTEK) Could Easily Take On More Debt

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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. Importantly, TBO Tek Limited (NSE:TBOTEK) does carry debt. But the more important question is: how much risk is that debt creating?

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Why Does Debt Bring Risk?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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 thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is TBO Tek's Net Debt?

As you can see below, at the end of September 2025, TBO Tek had ₹6.05b of debt, up from ₹1.38b a year ago. Click the image for more detail. However, it does have ₹19.3b in cash offsetting this, leading to net cash of ₹13.3b.

How Healthy Is TBO Tek's Balance Sheet?

According to the last reported balance sheet, TBO Tek had liabilities of ₹51.5b due within 12 months, and liabilities of ₹7.33b due beyond 12 months. Offsetting these obligations, it had cash of ₹19.3b as well as receivables valued at ₹45.3b due within 12 months. So it can boast ₹5.73b more liquid assets than total liabilities.

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

See our latest analysis for TBO Tek

Also good is that TBO Tek grew its EBIT at 13% over the last year, further increasing its ability to manage debt. There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if TBO Tek 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.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. TBO Tek 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, TBO Tek actually produced more free cash flow than EBIT. There's nothing better than incoming cash when it comes to staying in your lenders' good graces.

Summing Up

While it is always sensible to investigate a company's debt, in this case TBO Tek has ₹13.3b in net cash and a decent-looking balance sheet. The cherry on top was that in converted 107% of that EBIT to free cash flow, bringing in ₹1.1b. So we don't think TBO Tek's use of debt is risky. Above most other metrics, we think its important to track how fast earnings per share is growing, if at all. If you've also come to that realization, you're in luck, because today you can view this interactive graph of TBO Tek's earnings per share history for free.

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.