Debt Free Indian Companies: Investment Ideas in India 2017

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Debt free company
Debt free company

The companies which are more dependent on debt to manage their working capital, face the burnt of high interest rates. Interest rates of debt is fluctuating. When interest rates goes up, it will eventually increase the expense of company. This will automatically translate in profitability of the company.

India experiences both high inflation and high interest rates. Immediate effect of both on companies finance is negative.

High interest rates clearly affect companies operating costs & profit margins. Companies which remain isolated from effects of high interest rates are debt free companies.

Zero debt companies in India are ones which are more self reliant. Such companies are best suited for long term investing.

Profitability of zero debt companies are generally more than high debt companies. Debt is a liability which has also a big cost attached to it. Debt gives immediate relief but its also an expense for the future. Hence companies will lesser profit but zero debt are preferable.

In India we have several zero debt companies.

It will be not be wrong for us to base our investment decision starting from such companies.

[ Also Read: 21 Best Investment Ideas In India ]

In India, interest rates remain very unpredictable. One never know when rising trend will start again. This mainly happens mainly due to wavering inflation.

High interest rates negatively effects the profitability of high debt companies. In periods of soaring interest rates, low debt and debt free companies emerge as clear winners.

In India inflation can stabilizes for few year. But even with minor changes on political front, inflation cuts deep again.

For investors it is important to keep a note of debt free companies in India. Keeping track of price valuation of zero debt companies is a very good idea. Timing purchase of such stocks is recommended. I personally like debt free companies.

Study of debt levels of companies certainly helps. How dependent is company on debt, over long periods of time, speaks a lot about its fundamentals.

Only single year study will not be enough. Hence it is advisable to keep last 5 years financial reports of companies handy.

In this age of fast internet we can keep soft copies of financial statements. Internet enables access to information related to companies with click of a button.

Absolute/Net Profit and Interest Expenses

Even marginal increase in interest expense can effect profitability. To negate high interest costs, companies avoid maintaining high debts.

In case debt levels cannot be reduced, companies profits reduces. This is one compromise high debt companies makes all the time.

Debt free companies are completely free of such compromises.

Companies which are debt free generates their liquid cash comparatively easily. This cash is used to manage current liabilities.

Even small increase in interest rates can create big hole in companies profits.

A company, whose turnover is Rs 34,000 Crore & incurs Rs 1,300 Crore of Interest Expense.

This interest expense is 3.8% of total turnover of company.

In terms of expense requirements, 3.8% expense on any one item is is considers very high.

When there is no debt (immediate interest expense), companies liquidity level remains good. This makes day-to-day cash cash flow management relatively simpler.

Important Point to Note On Debt Free Companies

  1. Debt free companies are profitable companies so as their stocks.
  2. No/Zero debt companies have strong business fundamentals.
  3. High interest rates reduces profitability of debt companies
  4. For investing for long terms, always choose debt free companies stocks.
  5. Debt free companies have efficient revenue model.
  6. Investing is more secure in debt free companies than high P/E ration companies.

Why Debt Free Companies Are Ideal

For investors debt free companies are investment heaven. They are like financially independent profit booking companies.

Debt free companies are low risk companies for investors. Not only investors but even bankers love such companies. When need comes and such companies need debt, banks can lend them debt at low interest rates.

These companies have enough liquid cash/money which can run the business without asking for any grant or loan.

It has also been observed that, generally debt free companies share higher dividends with its shareholders.

List Of Debt Free Companies In India 2017

SLCompany nameMarket Price (Rs.)Market Cap (Rs.Million)Revenue Growth (5Y) EBITDA margin (%) Total debt/equity (%)
1NESCO Ltd.2,385.0033,500.0017.4371.050.00
2Just Dial Ltd604.4541,930.0030.3028.090.00
3Infosys Ltd1,040.002,370,000.0017.8227.480.00
4Vardhman Holdings Limited2,817.508,960.0043.7792.580.00
5JSW Holdings Ltd1,558.0517,280.0015.9194.150.00
6Tata Elxsi Limited1,516.7547,300.0020.9223.700.00
7Kalyani Investment Co Ltd1,640.007,170.0039.7995.120.00
8Hindustan Zinc Ltd310.101,310.007.2248.220.00
9ICRA Limited4,147.0041,960.0012.0628.830.00
10CMC Limited (Parent)2,034.3561,510.0023.2614.870.00
11VST Industries Limited2,839.4543,790.008.7226.060.00
12WIM Plast Ltd1,442.0017,320.0017.8422.640.00
13Tata Investment Corporation Limited625.2034,420.000.2592.750.00
14Akzo Nobel India Ltd1,588.0074,680.0020.1011.810.00
15Balmer Lawrie Investments Ltd.390.008,690.008.6097.860.00
16Monsanto India Limited2,523.0043,810.008.3123.420.00
17TTK Prestige Limited (Parent)5,913.9070,610.0014.8411.980.00
18Multi Commodity Exchange of India Ltd.1,117.2056,880.00-8.6363.760.00
19Channel Nine Entertainment Ltd28.356,600.00169.5616.100.00
20Vesuvius India Ltd1,238.8024,840.008.7417.990.00
21Yamini Investments Company Ltd33.6517,690.00260.195.700.00
22Zydus Wellness Ltd852.1033,390.004.9521.280.00
23TV Today Network Ltd.254.9515,140.0013.2317.630.00
24SQS India BFSI Ltd565.956,040.0026.0820.300.00
25Atul Auto Ltd408.959,020.0021.3213.350.00
26Sinclairs Hotels Limited379.002,110.0021.1143.330.00
27Ramco Systems Ltd353.1010,750.0017.0213.260.00
28Reliance Industrial Infrastructure Ltd.462.407,020.009.8720.520.00
29G M Breweries Ltd476.356,980.009.1920.490.00
30VST Tillers Tractors Limited1,846.2516,020.008.6414.630.00
31Thyrocare Technologies Ltd702.0037,550.0038.540.00
32Ultramarine & Pigments Ltd.170.005,010.0013.3319.440.00
33Multibase India Ltd272.103,430.0013.3121.160.00
34Geojit Financial Services Limited49.7511,740.00-0.9022.550.00
35Kirloskar Oil Engines Ltd390.4056,390.000.279.770.00
36Sterling Holiday Resorts India Ltd.250.3022,560.0038.01-3.720.00
37Indag Rubber Ltd193.955,100.0011.0116.510.00
38Accelya Kale Solutions Ltd1,408.9520,900.0041.480.00
39Ingersoll Rand India Limited693.6521,750.005.987.700.00
40Moil Ltd318.0042,330.00-11.2215.670.00
41Shanthi Gears Ltd.112.109,070.002.3018.650.00
42Gandhi Special Tubes Ltd341.955,020.00-0.2332.570.00
43ABM Knowledgeware Ltd149.002,990.007.9529.720.00
44Gromo Trade & Consultancy Ltd480.0013,300.00283.94-6.100.00
45Hindustan Oil Exploration Company Ltd71.859,400.00-32.4335.990.00
46D Link India Ltd139.304,950.0041.295.280.00
47Moryo Industries Ltd157.952,560.00126.949.220.00
48Sandur Manganese & Iron Ores Ltd.677.655,940.00-5.8431.260.00
49Quick Heal Technologies Ltd239.8016,780.0030.310.00
50Panasonic Carbon India Co Ltd454.001,130.0016.9735.960.00
51Manpasand Beverages Ltd730.1541,570.0019.240.00
52Wendt India Ltd.1,900.003,800.009.4015.410.00
53Benares Hotels Ltd1,181.301,540.0012.5327.790.00
54HPC Biosciences Ltd49.507,900.0083.120.00
55Novartis India Limited675.4018,970.001.487.630.00
56Kirloskar Pneumatic Company Ltd1,172.4015,000.000.6911.600.00
57IL & FS Investment Managers Ltd14.104,430.00-1.5226.540.00
58Kennametal India Limited595.8513,120.002.378.410.00
59Pincon Lifestyle Ltd100.353,030.00580.892.580.00
60Mps Ltd683.3012,810.0030.970.00
61VB Industries Ltd317.954,160.00454.25-0.390.00
62Dhanleela Investments & Trading Co Ltd49.452,340.00163.604.100.00
63Voltamp Transformers Limited946.459,570.001.028.030.00
64Saint-Gobain Sekurit India Limited46.804,270.008.4012.030.00
65Aptech Ltd234.059,410.00-6.0713.790.00
66Smartlink Network Systems Ltd94.002,120.00-1.7237.930.00
67Appu Marketing and Manufacturing Ltd315.354,600.00329.71-4.370.00
68Orient Refractories Ltd133.5516,110.0020.020.00
69Indian Toners & Developers Ltd163.451,310.0012.3320.350.00
70Vedvaag Systems Ltd68.80974.1836.5414.600.00
71Rubfila International Ltd47.052,040.0015.708.830.00
72Aplaya Creations Ltd14.142,030.00144.300.830.00
73Goodyear India Limited770.6017,810.0012.490.00
74Coral India Finance & Housing Ltd162.001,610.00-13.8067.030.00
75Divyashakti Granites Ltd127.001,260.0014.2014.620.00
76Alembic Limited36.959,870.00-9.006.610.00
77Credit Analysis And Research Ltd1,479.0043,710.0010.330.00
78Krishna Ventures Ltd591.706,390.0027.49-64.680.00
79Sangam Advisors Ltd34.50345.5128.7431.830.00
80Maharashtra Scooters Ltd.1,834.8021,050.007.69-87.550.00
81AstraZeneca Pharma India Limited950.0023,770.006.360.00
82Fortis Malar Hospitals Ltd69.951,310.009.1814.840.00
83Amba Enterprises Ltd152.501,920.0019.443.520.00
84Fervent Synergies Ltd28.75871.2722.589.970.00
85Mount Everest Mineral Water Ltd.102.003,470.003.765.710.00
86DIC India Ltd470.004,320.000.885.880.00
87Sai Baba Investment & Com Entrprs Ltd264.902,980.0063.980.00
88Balaji Telefilms Limited (Parent)89.656,810.008.78-10.200.00
89Clariant Chemicals (India) Ltd.670.2515,390.006.670.00
90Shilchar Technologies Ltd385.401,470.001.6916.730.00
91UP Hotels Ltd.297.701,560.005.5611.980.00
92Oswal Greentech Ltd26.856,900.0018.370.00
93Esab India Limited (Parent)595.009,180.009.480.00
94Eimco Elecon Ltd.481.902,760.00-5.5411.630.00
95Arihant Capital Markets Ltd55.001,130.00-3.2922.900.00
96Panasonic Energy India Co Ltd275.102,050.006.415.330.00
97Indo Tech Transformers Limited210.252,240.0010.97-2.320.00
98IVP Ltd155.001,600.003.518.980.00
99Bcpl International Ltd48.751,920.0071.100.00
100Mindteck (India) Ltd80.402,050.005.294.230.00
101DISA India Ltd5,000.007,270.009.550.00
102Voith Paper Fabrics India Ltd607.002,660.0029.710.00
103Indbank Merchant Banking Services Ltd13.40601.752.2724.940.00
104Panafic Industrials Ltd8.92732.56-31.3358.270.00
105Prerna Infrabuild Ltd36.50439.55-2.0871.560.00
106GMM Pfaudler Ltd.518.007,570.008.420.00
107Sreeleathers Ltd129.603,180.0019.670.00
108Econo Trade India Ltd31.40586.2248.451.790.00
109Mahavir Advanced Remedies Ltd150.651,670.0051.820.00
110Caprihans India Limited98.501,290.005.005.140.00
111India Nippon Electricals Ltd545.306,130.008.160.00
112Insilco Ltd26.401,660.002.482.930.00
113Arman Holdings Ltd110.00573.16324.18-2.900.00
114Rajlaxmi Industries Ltd2.85857.64176.58-109.110.00
115Goodricke Group Ltd.267.355,780.006.030.00
116NCL Research and Financial Services Ltd14.252,020.009.03-18.630.00
117Bata India Ltd529.5067,890.000.00
118Artech Power & Trading Ltd41.60617.2997.40-4.020.00
119Oswal Agro Mills Ltd10.321,390.0065.910.00
120Goenka Business & Finance Ltd84.251,100.0020.91-68.980.00
121Walchand Peoplefirst Ltd159.80464.0412.137.290.00
122CMI FPE Ltd618.003,050.00-12.72-1.530.00
123Alufluoride Ltd64.55449.1012.096.750.00
124Amrapali Fincap Ltd83.051,120.00-31.4413.410.00
125Greaves Cotton Ltd166.2040,470.000.00
126Shivkrupa Machineries and Engr Svcs Ltd61.40832.17103.500.00
127Dolat Investments Ltd2.40422.4018.043.580.00
128Swagruha Infrastructure Ltd5.00342.74-0.9024.360.00
129Yantra Natural Resources Ltd0.311,880.00-21.024.670.00
130Marathon Nextgen Realty Ltd257.407,380.00-42.20-120.110.00
131Tejnaksh Healthcare Ltd370.65818.4076.820.00
132Dwitiya Trading Ltd292.007,310.00-4.020.00
133Kirloskar Brothers Investments Ltd4,445.5023,450.000.00
134Piramal Phytocare Ltd84.602,200.00-16.76-0.750.00
135Mahanivesh India Ltd600.006,000.00-0.390.00
136Pressman Advertising Ltd63.001,480.0020.320.00
137Selan Exploration Technology Ltd.171.652,810.00-2.65-31.890.00
138R S Software (India) Ltd95.702,460.00-0.95-43.900.00
139Shree Global Tradefin Ltd2.512,860.00-28.36-3.650.00
140Triveni Enterprises Ltd80.484,560.000.710.00
141Superspace Infrastructure Ltd99.4020,930.000.00
142Intellivate Capital Ventures Ltd12.40360.84-63.1632.870.00
143Morganite Crucible India Ltd787.002,200.005.520.00
144Jupiter Infomedia Ltd76.00768.66-10.547.040.00
145Jmd Ventures Ltd2.67383.8016.950.080.00
146Duke Offshore Ltd145.10712.8948.510.00
147Orissa Minerals Development Company Ltd2,205.0013,210.000.00
148Atlas Jewellery India Ltd66.056,610.00-51.620.00
149Adhbhut Infrastructure Ltd53.55589.0576.680.00
150De Nora India Ltd234.101,240.0016.400.00
151South India Projects Ltd167.40842.3423.710.00
152Inditrade Capital Ltd36.501,070.00-17.111.310.00
153Elegant Marbles & Granite Industries Ltd108.60488.253.513.710.00
154ICVL Steels Ltd19.20605.5752.830.00
155Arihant Multi Commercial Ltd134.404,690.00-9.220.00
156Premier Capital Services Ltd279.3010,120.000.00
157Aadhaar Ventures India Ltd1.201,890.00-41.97-3.760.00
158Pranavaditya Spinning Mills Ltd27.20508.974.360.480.00
159India Gelatine & Chemicals Ltd.77.70730.381.84-3.500.00
160Neil Industries Ltd37.80739.11-13.783.550.00
161Singer India Ltd198.002,130.003.120.00
162Kothari World Finance Ltd72.00535.5070.400.00
163Fluidomat Ltd168.15839.2319.670.00
164Exdon Trading Company Ltd270.408,460.000.00
165Shree Tulsi Online Com Ltd15.95372.63-45.7814.850.00
166Meenakshi Enterprises Ltd306.153,800.00-114.260.00
167Pneumatic Holdings Ltd1,300.006,860.000.00
168Blue Circle Services Ltd4.00813.88-15.31-3.370.00
169Valiant Communications Ltd.73.00536.6013.480.00
170Avance Technologies Ltd0.31614.39-10.45-1.700.00
171Newtime Infrastructure Ltd22.153,640.00-410.900.00
172Partani Appliances Ltd215.902,560.00-6.770.00
173Iris Mediaworks Ltd17.251,720.000.080.00
174Punjab Communications Ltd47.15567.503.54-45.910.00
175TCFC Finance Ltd33.55352.19-2.553.680.00
176Sahara One Media & Entertainment Ltd.74.501,600.00-47.30-149.600.00
177ADC India Communications Limited264.901,220.005.530.00
178Jolly Plastic Inds Ltd122.00803.24-28.87-5.300.00
179Uniphos Enterprises Ltd69.004,800.000.00
180Prime Property Development Corp. Ltd.29.75504.0523.020.00
181RattanIndia Infrastructure Ltd3.274,490.000.00
182Jackson Investments Ltd4.201,220.00-21.930.00
183Mangalam Industrial Finance Ltd1.771,700.00-4.120.00
184Deccan Gold Mines Ltd40.003,620.000.00
185Integra Engineering India Ltd33.601,160.00-0.170.00
186Softsol India Ltd42.65717.48-4.580.00
187Kappac Pharmaceuticals Ltd112.853,320.000.00
188Alankit Ltd22.903,260.000.00
189Atlanta Infrastructure and Finance Ltd7.98897.37-53.210.00
190Essar Securities Ltd27.20390.9520.200.00
191Neelamalai Agro Industries Ltd1,008.00632.376.930.00
192Mukta Agriculture Ltd83.851,820.00-1,062.550.00
193ACI Infocom Ltd6.70740.29-47.630.00
194Shardul Securities Limited39.10684.19-31.310.00
195Industrial & Prudential Investment1,298.002,270.000.00
196Matra Kaushal Enterprise Ltd4.63933.95-4.790.00
197Saven Technologies Ltd32.05348.6618.150.00
198Dhyana Finstock Ltd135.301,280.00-737.670.00
199Synergy Bizcon Ltd55.20680.34-0.110.00
200Zandu Realty Limited1,255.351,010.00-61.920.00
201Sujala Trading & Holdings Ltd59.40339.8716.040.00
202HB Stockholdings Ltd16.75417.68-13.580.00
203Integra Telecommunication and Software50.00528.00-60.17-4,005.650.00
204Bombay Oxygen Corporation Ltd5,680.50852.08-16.790.00
205Aroni Commercials Ltd80.00330.00-10.890.00
206Golden Goenka Fincorp Ltd7.071,340.000.00
207ARC Finance Ltd13.10661.48-9.760.00
208STEL Holdings Ltd67.351,240.000.00
209Swadeshi Industries & Leasing Ltd4.55492.22-1.920.00
210Mishka Exim Ltd33.20479.74-1.330.00
211Layla Textile and Traders Ltd41.551,030.000.00
212Safal Herbs Ltd3.79379.000.590.00
213Cressanda Solutions Ltd3.00910.730.00
214Welcast Steels Ltd575.00366.940.440.00
215Symbiox Investment & Trading Co Ltd16.74523.44-19.120.00
216Emergent Global Edu and Services Ltd126.50577.98-207.620.00
217Omansh Enterprises Ltd21.95389.61-3.440.00
218ISL Consulting Ltd30.60366.12-0.850.00
219Tulive Developers Ltd157.00547.05-491.140.00
220Intellivate Capital Advisors ltd15.00466.13-40.370.00
221Jaysynth Dyestuff India Ltd(NDA)83.00721.250.00
222Asya Infosoft Ltd57.05699.310.00
223Jayshree Chemicals Ltd14.95444.38-171.580.00
224Bhilwara Technical Textiles Ltd9.87576.140.00
225Manvijay Development Co Ltd59.60386.21-1,298.240.00
226Presha Metallurgical Ltd38.95556.590.00
227DRA Consultants Ltd45.90503.520.00

Last updated march 2017.

Business Fundamentals and Zero Debt Relation

In order to understand this correlation, lets take an example. Look into NMDC’s balance sheet. In last 10 years NMDC had zero debt. During the same period, company was able to increase its reserves at staggering rate of 28% per annum.

Learning from the example of NMDC, I can say for sure that, Zero debt and fast increasing reserves is an excellent indicator of strong business fundamentals. As a result it will produce high returns.

Below is the analysis of Top 5 companies.

Top 5 Companies Debt Level Analysis
Top 5 Companies Debt Level Analysis

Conclusion: All Debt Free Companies are Good Investment ?

Generally debt free companies are good bet for investment. But all debt free companies may not be good.

A scrutiny of business fundamentals is a must before one goes ahead and buy their stocks.

Its will be good idea to check companies ‘Total Income growth (sales turnover)’. Though company is maintaining zero debt but; if it is not able to increase turnover, it will not be considered good.

To get more idea, compare sales turnover of company with its nearest competitors.

Concept says, it’s a good practice to keep debt levels as low as possible. But this should not be done at cost of ‘business growth’.

Companies which are compromising its growth are either complacent or does not have skillful & dynamic top managers.

A combination of high sales growth and low debt is ideal. Investors must keep track of such companies. Also, companies maintaining high profit margins automatically becomes most preferred by investors.

By all analysis, we learned that not all debt free companies are good option for investment. Because not just having zero debt defines good business. Track those companies which has zero or extreme low debt percentage and hold strong business fundamentals.