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Here's Why Roto Pumps (NSE:ROTO) Can Manage Its Debt Responsibly

Simply Wall St · 2d ago

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 note that Roto Pumps Limited (NSE:ROTO) does have debt on its balance sheet. But is this debt a concern to shareholders?

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When Is Debt Dangerous?

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. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest 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 Roto Pumps's Net Debt?

As you can see below, Roto Pumps had ₹164.0m of debt at September 2025, down from ₹316.1m a year prior. But on the other hand it also has ₹185.1m in cash, leading to a ₹21.2m net cash position.

debt-equity-history-analysis
NSEI:ROTO Debt to Equity History December 18th 2025

How Healthy Is Roto Pumps' Balance Sheet?

We can see from the most recent balance sheet that Roto Pumps had liabilities of ₹794.1m falling due within a year, and liabilities of ₹113.9m due beyond that. Offsetting these obligations, it had cash of ₹185.1m as well as receivables valued at ₹661.6m due within 12 months. So it has liabilities totalling ₹61.2m more than its cash and near-term receivables, combined.

Having regard to Roto Pumps' size, it seems that its liquid assets are well balanced with its total liabilities. So it's very unlikely that the ₹13.3b company is short on cash, but still worth keeping an eye on the balance sheet. Despite its noteworthy liabilities, Roto Pumps boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for Roto Pumps

But the bad news is that Roto Pumps has seen its EBIT plunge 20% in the last twelve months. If that rate of decline in earnings continues, the company could find itself in a tight spot. The balance sheet is clearly the area to focus on when you are analysing debt. But you can't view debt in total isolation; since Roto Pumps will need earnings to service that debt. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. Roto Pumps 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, Roto Pumps reported free cash flow worth 18% of its EBIT, which is really quite low. That limp level of cash conversion undermines its ability to manage and pay down debt.

Summing Up

We could understand if investors are concerned about Roto Pumps's liabilities, but we can be reassured by the fact it has has net cash of ₹21.2m. So we don't have any problem with Roto Pumps'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. Be aware that Roto Pumps is showing 1 warning sign in our investment analysis , 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.