Is Owais Metal and Mineral Processing (NSE:OWAIS) Overleveraged? A Detailed Debt Analysis
Owais Metal and Mineral Processing Ltd (NSE:OWAIS) has demonstrated significant financial growth recently. However, with this growth comes increased scrutiny of its capital structure, particularly its debt levels. This article delves into the company’s debt metrics to assess whether it is overleveraged or maintaining a prudent financial stance.
Debt-to-Equity Ratio: A Healthy Balance
As of March 2024, Owais reported a debt-to-equity ratio of 0.20, indicating that for every ₹1 of equity, the company has ₹0.20 in debt. This is a significant improvement from the previous year’s ratio of 5.61, showcasing effective debt management and a strong equity base.
Debt-to-EBITDA and Debt-to-Revenue: Low Leverage Indicators
The company’s debt-to-EBITDA ratio stands at 0.60, suggesting that it would take less than a year of earnings before interest, taxes, depreciation, and amortization to cover its debt—a sign of low leverage.
Similarly, the debt-to-revenue ratio is 0.17, meaning that only 17% of the company’s annual revenue would be needed to pay off its debt.
Interest Coverage Ratio: Strong Ability to Service Debt
Owais boasts an interest coverage ratio of 19.5, indicating that its earnings before interest and taxes (EBIT) are 19.5 times its interest obligations. This high ratio reflects the company’s robust ability to meet interest payments, reducing the risk of financial distress.
Cash Position: Adequate Liquidity
As of September 2024, Owais held ₹38.62 million in cash and short-term investments. While this is a decrease from ₹173.91 million in March 2024, the company maintains a current ratio of 2.69, indicating sufficient short-term assets to cover its short-term liabilities.
Long-Term Debt: Controlled and Manageable
The company’s long-term debt was reported at ₹61.33 million as of March 2024, a manageable figure given its equity base. This suggests that Owais is not heavily reliant on long-term borrowing to finance its operations.
Profitability and Return Metrics: Positive Indicators
Owais has demonstrated strong profitability, with a Return on Equity (ROE) of 44.90% and a Return on Assets (ROA) of 28.97% for FY 2024. These figures indicate efficient use of equity and assets to generate profits.