Debt has a big impact on a company’s current performance and potential future growth. It’s critical to understand how much leverage a corporation has. This is especially true now that many firms are having difficulty.
If a company’s balance sheet shows no debt, it can be said to be debt-free. Businesses like this have better financial management and have no outstanding loans. They have greater independence and decision-making speed.
In general, a debt-free firm is seen favorably since it has fewer obligations to meet and may use its cash to make investments that will boost performance.
Debt may help businesses cover some of their expenses if it is handled appropriately, but organizations that have little to no debt, or none at all, have a greater chance of surviving than those that do. For companies operating in capital-intensive sectors, this is mostly true. Therefore, a company with debt on its records shouldn’t be considered adversely unless its fundamentals back it up.
On the other hand, you should stick to fundamentally sound companies that have no debt if you have a low-risk tolerance. In truth, these companies are a gold mine regardless of an investor’s risk tolerance.
Bharat Electronics (BEL)
An Indian Navratna public sector undertaking is Bharat Electronics (PSU). The business produces a variety of specialised electronic equipment for both military and non-military applications. Defense and non-defense products can be generally categorized as part of its product line. It contains a wide range of both basic and complicated items, including batteries, radars, electronic voting machines, and encryption, among others. BEL has nine cutting-edge production facilities to meet the needs of its customers.
BEL has four research and development centers. It invests an average of 7% of its yearly revenue in R&D to supply the armed forces with cutting-edge hardware. The corporation has been looking into various options to diversify its revenue streams. It has partnered with General Electric Medical Systems to produce medical electronic systems. Additionally, the business will assist India’s developing electric vehicle (EV) industry. It will produce goods like Li-ion batteries and fuel cells that are necessary for the EV ecosystem.
BEL is a lucrative company, with sales and earnings expanding at CAGRs of 9.4% and 6% during the last five years, respectively. BEL has no debt on its records while operating as a capital-intensive company. Bharat Electronics has had zero or very little debt on its balance sheet for the past 20 years. Over the years, the firm has continuously been able to keep and somewhat increase its operating margins. This only demonstrates that BEL has been able to expand steadily without taking on any debt.
Tata Consultancy Services (TCS).
Tata Consultancy Services (TCS) is the second-biggest corporation in terms of market capitalization and the leading provider of IT services in India. The Tata group company operates in 149 sites across 46 countries, the Tata group company. The large IT company recorded sales of Rs. 50,591 crore and a net profit of Rs. 9,926 crore for the quarter ending March 2022.
In terms of volume, Relaxo Footwear is the largest producer of footwear goods in India. Despite the difficult climate created by the pandemic, the firm sold 190 million pairs of shoes in the fiscal year 2021. Relaxo produces a variety of goods under several names, including Flite, Sparx, Bahamas, etc. It is based in New Delhi and has eight production facilities. Salman Khan and Akshay Kumar, two well-known Bollywood actors, serve as brand ambassadors for Relaxo. It claims exceptional financial standing, with sales and profit expanding at CAGRs of 9.3% and 24.9% over the last five years, respectively. Relaxo Footwear’s emphasis on offering its clients high-quality goods at competitive prices benefits the company.
To constantly expand, businesses like Relaxo Footwear must make investments in production facilities. Installing a production plant, however, is a costly endeavour and will cost millions of rupees. In capital-intensive industries, manufacturing enterprises do have some debt on their balance sheets. With Relaxo, this isn’t the case.
Since Relaxo has no debt, internal accruals are used to cover its expenses. Because of its great operational efficiency, the business earns enough cash from operations to cover both its operating and capital expenses.
The largest pharmaceutical and life sciences firm in the world, Bayer AG, which is located in Germany, has an Indian subsidiary called Bayer Crop Science India, and the corporation has been connected since the 19th century. Since then, it has continued to have a tremendous impact on India’s agricultural and general well-being.
Through its three business divisions—crop science, pharmaceutical products, and consumer healthcare—it offers a range of goods and services. Crop science is the division among its three that generates the most revenue. The business supplies farmers with modest landholdings with goods and services, including genetically modified seeds and digital agricultural solutions.
Through Bayer-Zydus Pharma, a partnership between Bayer Crop Sciences and Zydus Cadila Healthcare, Bayer offers its pharmaceutical goods. Six production sites spread around the nation are used by the corporation to produce these goods.
The heart of Bayer’s business is R&D. Three R&D centers have been set up by the corporation in India. The firm has a little debt of Rs 15 m during the 2019–20 fiscal years. However, the business eliminated all of its debt in the fiscal years 2020–2021 and achieved debt freedom.
It is a very well-managed business, both financially and operationally. Over the previous five years, Bayer’s sales and profit increased at a CAGR of 9.9% and 11%, respectively. The company’s primary competitive edge continues to be technological innovation. In Hyderabad, Bayer recently sprayed agricultural areas using drones.
Grindwell Norton is a division of the French multinational Saint-Cobain Company. As of December 2021, the group owned 51.6 percent of the corporation. With the help of its four business divisions, Grindwell Norton produces a variety of technical goods. Numerous sectors, including jewelry, autos, and others, use these items.
The business was a pioneer in the production of grinding wheels. In industries, grinding wheels are used to polish a variety of surfaces. Abrasives, one of the numerous goods produced and sold by Grindwell Norton, are used to make these wheels.
Grindwell Norton is a world leader in geotextiles in addition to abrasives. Polyester-based geotextiles are permeable textiles. These materials are employed in crucial fields, including road reinforcement and coal mining. Grindwell Norton uses six production sites spread across the nation’s major regions to produce its goods.
The company’s strong financials are a reflection of its dominant position in the industry. Its sales and profit statistics have increased at a CAGR of 7.7 and 14.5 percent over the last five years, respectively. Additionally, the business has been paying all of its costs out of earnings, which suggests that it has no debt. It hasn’t incurred any debt in the last four years.
Hindustan Unilever Limited (HUL)
HUL has been in business for more than 80 years and is one of India’s largest fast-moving consumer goods companies. More than 90% of Indian families use one or more of the company’s goods, demonstrating how deeply ingrained it is in the culture of the country. This places HUL in a distinctive situation.
Household names including Surf Excel, Lux, Lifebuoy, Dove, Fair & Lovely, Rin, Wheel, Vaseline, Sunsilk, Axe, Lakme, Pepsodent, Closeup, Brooke Bond, Kwality Wall’s, Knorr, Pond’s Clinic Plus, Lipton, Kissan, etc. are among the well-known brands in HUL’s portfolio. After merging with GlaxoSmithKline Consumer Healthcare Limited, HUL has acquired additional brands, including Boost and Horlicks.
Twentyfirst Century Management Services Ltd.
Twenty-First Century Management Services, or TCMS, was established in March of that year. The companies that make up the TCMS group include Sunder Iyer, Twenty-First Century Money Growth Fund, Goa Agro Oils, and Mauli & Company. In order to grow its investment banking activities and increase infrastructural capabilities at a total expenditure of Rs 72.65 crore, the company conducted a public offering in February 1995 at a premium of Rs 50 per share.
This raised Rs 15.85 crore. The TCMS offers coverage for corporate finance, capital markets, equity research, merchant banking, and other business-related fields. Some of its clients include Alpic Finance, RPG Telecom, Kakatiya Textiles, and other businesses.
BF Investment Ltd.
A subsidiary of the Kalyani Group, which has a market value of USD 2.5 billion and is situated in Pune, is BF Investment (BFIL). A Composite Scheme of Arrangement was used to demerge the investment division of BF Utilities Ltd. to create BFIL. As a result of the aforementioned corporate restructuring, the investment company was transferred to BF Investment Ltd. If you have given these debt-free businesses considerable attention, you may have observed that they also offer excellent earnings per share.
ADF Foods Ltd.
An international food maker and distributor, ADF Foods has operations in over 55 nations. We provide consumers throughout the world with a variety of delicious sauces, pickles, chutneys, pastes, ready-to-cook, ready-to-eat, and frozen foods. At ADF Foods, we prioritize customer service, practicality, and quality. Our corporate activities include a primary manufacturing and export enterprise, a network of agency distributors, and domestic businesses.
The largest footwear maker and retailer in the nation were founded in 1931 and are called “Bata India Limited.” They have four modern production sites around the nation that are carefully positioned and create various types of footwear. Over a thousand outlets, including franchisee stores, make up the company’s substantial pan-India retail footprint. Over the past few years, the company’s revenue has increased significantly. The company’s market capitalization is now Rs 24,793 Cr and its debt-to-equity ratio is 0. Over the past few years, the company’s revenue has increased significantly. The company’s market capitalization is now Rs 24,793 Cr and its debt-to-equity ratio is 0.
Whirlpool of India Ltd.
At the end of September 2021, Whirlpool of India had cash and cash equivalents of Rs 1,188 crore, down from Rs 2,063 crore at the end of September 2021. The firm is debt-free. It is one of the top producers and distributors of electrical equipment, including refrigerators and washing machines. Additionally, it produces and sells built-in, compact, and microwave appliances for both local and foreign markets.
It is one of the top producers and distributors of electrical equipment, including refrigerators and washing machines. Additionally, it produces and sells built-in, compact, and microwave appliances for both local and foreign markets. Increasing competition in the refrigerator market, which has been the corporation’s main source of growth, has put the company under pressure. Additionally, Whirlpool has had significantly slower growth in its service, room AC, and washing machine income.