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Debt Free Companies In India – Good for Investment?

debt free companies

Debt Free Companies are companies with no or minimum debt. These companies are cash rich and they can withstand in any type of economic conditions. The Best example of debt free company in India is Infosys. Infosys doesn’t have any outstanding debt. Infosys is generates enough revenue to finance all internal operations and investment requirements. Infosys has given very good returns to investors. Debt Free Companies enjoys many benefits and are a good bet for investment.

Let’s have a look at Debt Free Companies as an Investment option.

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Why Debt Free Companies is good for Investment?

Few pointers about why debt free companies are good bet for investment is given below:-

  • Debt free companies are not affected by economic slowdown or interest rate hike. They can sustain their business in economic slowdown condition also.
  • Profitability of debt free (Zero debt) companies will be high compared to high debt companies. High-Interest rate negatively affects profit margin of high debt companies.
  • In India Interest rate and inflation rate are unpredictable which makes debt free companies more suitable for investment.
  • These companies enjoy extra income as interest on cash balance which is added surplus in profitability.
  • High profitability means good dividend to investors.
  • These companies can expand their business due to ample amount of cash or can acquire other businesses.
  • Low debt companies need not to keep cash aside to meet the cost of capital, which high debt companies have to set aside.
  • Debt free companies are low-risk companies preferred by common man and expert investors.

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Debt Free Companies In India

debt free companies

Should you invest in Debt Free Companies?

It is but obvious that debt free companies are good for investment. However, all debt free companies are not good. It is a good idea to check company’s fundamentals, valuation, profit margin, future business opportunities and other factors before making an investment. You should debt free companiesalso check that company is able to maintain debt free status for several years or not, maintaining status only for one year will not serve any purpose.

These companies should be growing in terms of turnover and business growth. Low debt companies limiting business growth for maintaining debt free status is not good for investment.

Do proper study before making an investment in any debt free companies.

Shitanshu Kapadia
Shitanshu Kapadia
Hi, I am Shitanshu founder of moneyexcel.com. I am engaged in blogging & Digital Marketing for 10 years. The purpose of this blog is to share my experience, knowledge and help people in managing money.