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华尔街日报Here's Why Marksans Pharma (NSE:MARKSANS) Can Manage Its Debt Responsibly
Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. We can see that Marksans Pharma Limited (NSE:MARKSANS) does use debt in its business. But should shareholders be worried about its use of debt?
When Is Debt A Problem?
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. If things get really bad, the lenders can take control of the business. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. 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 Marksans Pharma's Net Debt?
As you can see below, Marksans Pharma had ₹233.8m of debt, at September 2025, which is about the same as the year before. You can click the chart for greater detail. But on the other hand it also has ₹6.67b in cash, leading to a ₹6.44b net cash position.
How Strong Is Marksans Pharma's Balance Sheet?
According to the last reported balance sheet, Marksans Pharma had liabilities of ₹4.55b due within 12 months, and liabilities of ₹2.74b due beyond 12 months. Offsetting this, it had ₹6.67b in cash and ₹6.28b in receivables that were due within 12 months. So it can boast ₹5.67b more liquid assets than total liabilities.
This short term liquidity is a sign that Marksans Pharma could probably pay off its debt with ease, as its balance sheet is far from stretched. Simply put, the fact that Marksans Pharma has more cash than debt is arguably a good indication that it can manage its debt safely.
View our latest analysis for Marksans Pharma
On the other hand, Marksans Pharma saw its EBIT drop by 4.5% in the last twelve months. That sort of decline, if sustained, will obviously make debt harder to handle. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Marksans Pharma's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.
But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. Marksans Pharma 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. In the last three years, Marksans Pharma created free cash flow amounting to 15% of its EBIT, an uninspiring performance. For us, cash conversion that low sparks a little paranoia about is ability to extinguish debt.
Summing Up
While it is always sensible to investigate a company's debt, in this case Marksans Pharma has ₹6.44b in net cash and a decent-looking balance sheet. So we don't have any problem with Marksans Pharma's use of debt. 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. These risks can be hard to spot. Every company has them, and we've spotted 1 warning sign for Marksans Pharma 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.