Shree Tirupati Balajee FIBC has a debt to EBITDA ratio of 3.0 and its EBIT covered its interest expense 5.4 times. Taken together this implies that, while we wouldn’t want to see debt levels rise, we think it can handle its current leverage. We note that Shree Tirupati Balajee FIBC grew its EBIT by 28% in the last year, and that should make it easier to pay down debt, going forward. There’s no doubt that we learn most about debt from the balance sheet. But it is Shree Tirupati Balajee FIBC’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.
Finally, a business needs free cash flow to pay off debt; accounting profits just don’t cut it. So we clearly need to look at whether that EBIT is leading to corresponding free cash flow. During the last three years, Shree Tirupati Balajee FIBC burned a lot of cash. While investors are no doubt expecting a reversal of that situation in due course, it clearly does mean its use of debt is more risky.
https://simplywall.st/stocks/in/materials/nse-tirupati/shree-tirupati-balajee-fibc-shares/news/we-think-shree-tirupati-balajee-fibc-nsetirupati-can-stay-on