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Chambal Fertilisers and Chemicals (NSE:CHAMBLFERT) Could Easily Take On More Debt

Simply Wall St · 4d 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.' 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, Chambal Fertilisers and Chemicals Limited (NSE:CHAMBLFERT) does carry debt. But should shareholders be worried about its use of debt?

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What Risk Does Debt Bring?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. 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. 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 Chambal Fertilisers and Chemicals's Debt?

You can click the graphic below for the historical numbers, but it shows that as of September 2025 Chambal Fertilisers and Chemicals had ₹855.3m of debt, an increase on ₹807.1m, over one year. But it also has ₹9.16b in cash to offset that, meaning it has ₹8.30b net cash.

debt-equity-history-analysis
NSEI:CHAMBLFERT Debt to Equity History January 8th 2026

How Healthy Is Chambal Fertilisers and Chemicals' Balance Sheet?

According to the last reported balance sheet, Chambal Fertilisers and Chemicals had liabilities of ₹25.3b due within 12 months, and liabilities of ₹15.0b due beyond 12 months. Offsetting this, it had ₹9.16b in cash and ₹22.6b in receivables that were due within 12 months. So its liabilities total ₹8.55b more than the combination of its cash and short-term receivables.

Given Chambal Fertilisers and Chemicals has a market capitalization of ₹187.6b, it's hard to believe these liabilities pose much threat. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. Despite its noteworthy liabilities, Chambal Fertilisers and Chemicals boasts net cash, so it's fair to say it does not have a heavy debt load!

Check out our latest analysis for Chambal Fertilisers and Chemicals

And we also note warmly that Chambal Fertilisers and Chemicals grew its EBIT by 10% last year, making its debt load easier to handle. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine Chambal Fertilisers and Chemicals's ability to maintain a healthy balance sheet going forward. 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. Chambal Fertilisers and Chemicals 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, Chambal Fertilisers and Chemicals actually produced more free cash flow than EBIT. That sort of strong cash generation warms our hearts like a puppy in a bumblebee suit.

Summing Up

While it is always sensible to look at a company's total liabilities, it is very reassuring that Chambal Fertilisers and Chemicals has ₹8.30b in net cash. And it impressed us with free cash flow of -₹18b, being 150% of its EBIT. So is Chambal Fertilisers and Chemicals's debt a risk? It doesn't seem so to us. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. We've identified 3 warning signs with Chambal Fertilisers and Chemicals (at least 2 which are potentially serious) , and understanding them should be part of your investment process.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.