Swelect Energy Systems (NSE:SWELECTES) Seems To Use Debt Quite Sensibly

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. Importantly, Swelect Energy Systems Limited (NSE:SWELECTES) does carry debt. But is this debt a concern to shareholders?We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free. When Is Debt A Problem? Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first thing to do when considering how much debt a business uses is to look at its cash and debt together. What Is Swelect Energy Systems's Debt? You can click the graphic below for the historical numbers, but it shows that as of September 2025 Swelect Energy Systems had ₹6.62b of debt, an increase on ₹6.33b, over one year. However, it does have ₹5.93b in cash offsetting this, leading to net debt of about ₹685.1m. NSEI:SWELECTES Debt to Equity History January 24th 2026 How Healthy Is Swelect Energy Systems' Balance Sheet? According to the last reported balance sheet, Swelect Energy Systems had liabilities of ₹5.01b due within 12 months, and liabilities of ₹3.59b due beyond 12 months. Offsetting these obligations, it had cash of ₹5.93b as well as receivables valued at ₹669.6m due within 12 months. So its liabilities total ₹2.00b more than the combination of its cash and short-term receivables. While this might seem like a lot, it is not so bad since Swelect Energy Systems has a market capitalization of ₹7.79b, and so it could probably strengthen its balance sheet by raising capital if it needed to. However, it is still worthwhile taking a close look at its ability to pay off debt. Check out our latest analysis for Swelect Energy Systems We use two main ratios to inform us about debt levels relative to earnings. The first is net debt divided by earnings before interest, tax, depreciation, and amortization (EBITDA), while the second is how many times its earnings before interest and tax (EBIT) covers its interest expense (or its interest cover, for short). Thus we consider debt relative to earnings both with and without depreciation and amortization expenses. Swelect Energy Systems has a very low debt to EBITDA ratio of 0.51 so it is strange to see weak interest coverage, with last year's EBIT being only 2.3 times the interest expense. So one way or the other, it's clear the debt levels are not trivial. Importantly, Swelect Energy Systems grew its EBIT by 46% over the last twelve months, and that growth will make it easier to handle its debt. There's no doubt that we learn most about debt from the balance sheet. But it is Swelect Energy Systems'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. Click here for an interactive snapshot. Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. So it's worth checking how much of that EBIT is backed by free cash flow. Looking at the most recent three years, Swelect Energy Systems recorded free cash flow of 32% of its EBIT, which is weaker than we'd expect. That's not great, when it comes to paying down debt. Our View When it comes to the balance sheet, the standout positive for Swelect Energy Systems was the fact that it seems able to grow its EBIT confidently. But the other factors we noted above weren't so encouraging. To be specific, it seems about as good at covering its interest expense with its EBIT as wet socks are at keeping your feet warm. Considering this range of data points, we think Swelect Energy Systems is in a good position to manage its debt levels. Having said that, the load is sufficiently heavy that we would recommend any shareholders keep a close eye on it. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. Case in point: We've spotted 4 warning signs for Swelect Energy Systems you should be aware of. Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.