Here's Why Pondy Oxides And Chemicals (NSE:POCL) 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.' 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. As with many other companies Pondy Oxides And Chemicals Limited (NSE:POCL) makes use of debt. 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. 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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together.
What Is Pondy Oxides And Chemicals's Debt?
The image below, which you can click on for greater detail, shows that Pondy Oxides And Chemicals had debt of ₹365.8m at the end of September 2025, a reduction from ₹1.45b over a year. But it also has ₹1.06b in cash to offset that, meaning it has ₹697.4m net cash.
A Look At Pondy Oxides And Chemicals' Liabilities
The latest balance sheet data shows that Pondy Oxides And Chemicals had liabilities of ₹775.2m due within a year, and liabilities of ₹40.5m falling due after that. Offsetting these obligations, it had cash of ₹1.06b as well as receivables valued at ₹1.67b due within 12 months. So it can boast ₹1.92b more liquid assets than total liabilities.
This surplus suggests that Pondy Oxides And Chemicals has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, Pondy Oxides 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 Pondy Oxides And Chemicals
On top of that, Pondy Oxides And Chemicals grew its EBIT by 58% over the last twelve months, and that growth will make it easier to handle its debt. The balance sheet is clearly the area to focus on when you are analysing debt. But it is Pondy Oxides And Chemicals's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.
Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. While Pondy Oxides And Chemicals has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. Over the last three years, Pondy Oxides And Chemicals saw substantial negative free cash flow, in total. While that may be a result of expenditure for growth, it does make the debt far more risky.
Summing Up
While we empathize with investors who find debt concerning, you should keep in mind that Pondy Oxides And Chemicals has net cash of ₹697.4m, as well as more liquid assets than liabilities. And we liked the look of last year's 58% year-on-year EBIT growth. So we don't have any problem with Pondy Oxides And Chemicals's use of debt. Of course, we wouldn't say no to the extra confidence that we'd gain if we knew that Pondy Oxides And Chemicals insiders have been buying shares: if you're on the same wavelength, you can find out if insiders are buying by clicking this link.
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.