These 4 Measures Indicate That Bikaji Foods International (NSE:BIKAJI) Is Using Debt Reasonably Well
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.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. We can see that Bikaji Foods International Limited (NSE:BIKAJI) does use debt in its business. But the real question is whether this debt is making the company risky.
What Risk Does Debt Bring?
Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. 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 Bikaji Foods International Carry?
The image below, which you can click on for greater detail, shows that at September 2025 Bikaji Foods International had debt of ₹2.24b, up from ₹1.69b in one year. But it also has ₹3.17b in cash to offset that, meaning it has ₹930.2m net cash.
How Strong Is Bikaji Foods International's Balance Sheet?
We can see from the most recent balance sheet that Bikaji Foods International had liabilities of ₹4.16b falling due within a year, and liabilities of ₹1.82b due beyond that. Offsetting these obligations, it had cash of ₹3.17b as well as receivables valued at ₹1.72b due within 12 months. So its liabilities total ₹1.09b more than the combination of its cash and short-term receivables.
Having regard to Bikaji Foods International's size, it seems that its liquid assets are well balanced with its total liabilities. So while it's hard to imagine that the ₹182.3b company is struggling for cash, we still think it's worth monitoring its balance sheet. Despite its noteworthy liabilities, Bikaji Foods International boasts net cash, so it's fair to say it does not have a heavy debt load!
See our latest analysis for Bikaji Foods International
The modesty of its debt load may become crucial for Bikaji Foods International if management cannot prevent a repeat of the 29% cut to EBIT over the last year. Falling earnings (if the trend continues) could eventually make even modest debt quite risky. There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine Bikaji Foods International'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.
Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. Bikaji Foods International 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. Looking at the most recent three years, Bikaji Foods International recorded free cash flow of 33% of its EBIT, which is weaker than we'd expect. That weak cash conversion makes it more difficult to handle indebtedness.
Summing Up
While it is always sensible to look at a company's total liabilities, it is very reassuring that Bikaji Foods International has ₹930.2m in net cash. So we don't have any problem with Bikaji Foods International's use of debt. 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. These risks can be hard to spot. Every company has them, and we've spotted 1 warning sign for Bikaji Foods International 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.