DSIJ Mindshare

Grab Debt free companies in your pocket- sooner the better for investors

Investors are more interested in debt free and cash rich stocks. Debt free companies prove to be a lower risk investment and are a preferred bet for investors. So, we have analysed 250 large cap stocks according to their long and short term debt position as compared to previous fiscal.

Why debt free companies are street players' favourites?

1.       Low debt companies enjoy higher profitability as compared to high debt companies.
2.       High profitability leads to better cash generation and hence possibility of dividend in investors' pockets.
3.       These companies can expand or acquire business easily due to high internal accruals.
4.       Low debt companies are less impacted by interest rate change.
5.       Low debt companies invite investor interest due to low risk of liquidation.

Company Name

Market Cap

1Y Reduced Debt %

1Y Revenue Growth %

1Y Return %

Jyothy Laboratories Ltd.

5391

98

9

-1

Triveni Turbine Ltd.

3641

97

22

-5

Sharda Cropchem Ltd.

3501

95

15

13

Force Motors Ltd.

3864

75

29

92

Havells India Ltd.

22867

71

4

26

We have analysed stocks which have seen highest reduction of debt in FY16. We have noticed that out of 250 Large-cap companies 87 companies were on the path of debt reduction. Our top five positions were grabbed by Jyothy Laboratories Ltd., Triveni Turbine Ltd., Sharda Cropchem Ltd., Force Motors Ltd., and Havells India. These companies have successfully reduced their long and short term borrowing by more than 70%.

Apart from Jyothy Laboratories and Triveni Turbine, other three companies have rewarded investors in double digits. Force Motors has gifted investors with highest returns- 92 per cent; followed by Havells India- 26 per cent returns over a one year span. These top five companies have also posted average top line growth of 16 per cent.

We see that investors view the debt repayment positively as it also indicates better cash generation by the company and hence can be a precursing indicator of return to growth trajectory.

DSIJ MINDSHARE

Mkt Commentary28-Mar, 2024

Multibaggers28-Mar, 2024

Interviews28-Mar, 2024

Multibaggers28-Mar, 2024

Multibaggers28-Mar, 2024

DALAL STREET INVESTMENT JOURNAL - DEMOCRATIZING WEALTH CREATION

Principal Officer: Mr. Shashikant Singh,
Email: principalofficer@dsij.in
Tel: (+91)-20-66663800

Compliance Officer: Mr. Rajesh Padode
Email: complianceofficer@dsij.in
Tel: (+91)-20-66663800

Grievance Officer: Mr. Rajesh Padode
Email: service@dsij.in
Tel: (+91)-20-66663800

Corresponding SEBI regional/local office address- SEBI Bhavan BKC, Plot No.C4-A, 'G' Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400051, Maharashtra.
Tel: +91-22-26449000 / 40459000 | Fax : +91-22-26449019-22 / 40459019-22 | E-mail : sebi@sebi.gov.in | Toll Free Investor Helpline: 1800 22 7575 | SEBI SCORES | SMARTODR