Which Indian companies reduced debt substantially this year?
As per Equitymaster's Stock Screener, these are the Indian companies which reduced the maximum debt this year.
Please note, the calculation is done on the basis of change in long term debt in the latest financial year.
Which are the debt free stocks in India?
As per Equitymaster's Stock Screener, these are some of the debt free stocks in India right now...
These companies have zero or negligible debt on their books as of latest financial year.
- #1 BAJAJ HOLDINGS & INVESTMENT
- #2 SIEMENS
- #3 BOSCH
- #4 MINDTREE
- #5 IRCTC
Investors have a liking for debt free stocks as they have the ability to tide over higher interest rate environments.
Do debt free companies bring huge profits?
Debt plays an important role in the present performance and future growth of any company.
It's really important to know the extent of leverage, especially in challenging times when interest rates are rising, and many businesses are still struggling due to the pandemic-led disruption.
Debt free stocks usually have relatively strong cash flows and come with low risk unlike companies with high debt, which are high risk.
So yes, it's very likely that you'll see a debt free company report decent profits.
Should you avoid high debt stocks?
Not necessarily. Many companies go down the route of taking debt because debt can help companies grow and expand. It's only when the debt is unserviceable that the company will find itself in trouble.
There is a good chance that companies with high debt can generate strong cash flows to service their interest cost and re-pay the debt comfortably. So even if a company has a pile of debt, it doesn't necessarily mean it is in trouble.
Check out Equitymaster's stock screener which lists out the high debt companies in India right now.
Why do investors have a liking for companies with debt reduction?
Investors like stocks with debt reduction because they foresee higher profits in the years ahead due to the debt reduction.
What are the other important parameters to consider when looking at a company's debt?
Analysts use the debt-to-equity ratio to depicts the financial leverage that the company uses in its operations.
Another popular ratio, other than the debt to equity ratio, is the interest coverage ratio. The interest coverage ratio measures the ease with which a company can pay back the interest due on its total debt.