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Top Debt Free Companies in India 2022

14 June 2022

When you look at the financials of a company, different factors play different roles in helping you understand its strength. The debt section is an important field. If a company has zero debt on its balance sheet, then it is known as a debt free company. Debt plays an important role in the present performance and future growth of any company.

What is a Debt Free Company?

To put it in simple words, a debt free company in India is a company that does not have any debt or any kind of external borrowing. A debt free company is said to be an independent company, completely self-reliant, without carrying any outstanding loans.

Top Debt free Companies in India 2022

In the current economic situation, where most companies are struggling due to the lockdown, companies with zero interest burden stand a better chance of surviving than those with high debts. Here is a look at the top debt free companies in India in 2022 (by market capitalization).

Note: This debt free company list is based only on published financial data and is not a recommendation. Please conduct due diligence before picking a company to invest in.

S.No

List of Debt free Companies

Category

1.

TCS

Information Technology

2.

Infosys

Information Technology

3.

Mindtree 

Information Technology

4.

Divi’s Laboratories 

Pharmaceutical 

5.

Gland Pharma

Pharmaceutical 

6.

Larsen & Toubro Infotech 

Technology Consulting & Digital Solutions

7.

Hindustan Unilever

FMCG

8.

IRCTC

Railways

9.

Bharat Electronics

Aerospace & Defence Electronics

10.

SBI Life Insurance

Life Insurance

List of the Top Debt free Companies in India 2022: Performance Overview

1)TCS

TCS, a part of the Tata group, is one of the largest IT services companies in India. It is one of the big names in the Information. Tata Consultancy Services is a global leader in IT services, consulting & business solutions that have a huge network of delivery centers.

2) Infosys

Infosys is another company on the list of zero debt company. It is one of India’s top Information Technology companies that has been providing business consulting services, IT, and numerous outsourcing services.

3) Mindtree

Mindtree Ltd. is one of the most prominent information technology companies of Larsen & Toubro Group. This well-established company delivers digital transformation and technology services right from ideation to the final execution.

4) Divi’s Laboratories 

Divi’s Laboratories is a renowned Indian manufacturer of Generic Active Pharmaceutical Ingredients and Nutraceutical Ingredients. It provides a Custom Synthesis of APIs. The company is huge in terms of market share and capitalization as it provides its products to more than 90 countries.

5) Gland Pharma

Gland Pharma is known to be one of the largest injectable-focused companies in the world. It operates on a B2B model and has its business spread across more than 50 countries. This pharmaceutical company is one of the fastest-growing small-molecule generic injectables-focused companies to work successfully globally.

6) Larsen & Toubro Infotech 

Larsen & Toubro Infotech is one of the largest IT Services & Consulting companies in India. It offers end-to-end software solutions and services globally. It has a global presence in more than 20 countries.

7) Hindustan Unilever

With more than 44 brands across 14 distinct categories, Hindustan Unilever is one of the country’s fastest-growing FMCG companies. It has been in India for over 80 years and growing at a steady pace. It is a renowned company and is one of the Indian companies with zero debt.

8) Indian Railway Catering and Tourism Corporation (IRCTC)

IRCTC is a Government of India-owned corporation that has a monopoly business for offering multiple services including ticketing, tourism services, and catering for the Indian Railways.

9) Bharat Electronics 

A Government-owned aerospace and defense electronics company, Bharat Electronics is a renowned name in its respective industry. It manufactures advanced electronic products mainly for serving the ground and aerospace applications. 

10) SBI Life Insurance Company

SBI Life Insurance Company is one of the top and most trusted life insurance companies in India that offers multiple life insurance plans. It is an insurance subsidiary of the State Bank of India.

Pros and Cons of Investing in a Debt-free Company

Many investors think that if a company is debt-free, then it should be a fundamentally strong company. However, that is not always the case. If you look at the list of debt-free companies and analyze their financials thoroughly, you will be in a better position to determine the viability of investing in its stock. Here is a quick look at the pros and cons of investing in a debt-free company:

Pros

Cons

Debt-free companies are less likely to go bankrupt since they have strong financials 

If the company seeks financing via equity, then they have a lower Earning Per Share (EPS) ratio

Since there is no debt, there is no interest payment requirement

Companies opting for equity financing over debt pay higher taxes

These companies are better equipped to handle economic slowdowns since their fixed outgo is lower

Companies with zero debt tend to have a higher cost of financing

Such companies tend to book a higher profit margin

 

Since interest cost is a fixed cost, debt-free companies tend to have a lower break-even point

 

Usually, a company with low debt that it can service comfortably is considered to be a good company. This is because it can avail of tax benefits and use the funds to improve its performance and growth.

Summing Up

While analyzing a company to select a stock for investing, it is important to remember that just because a company is debt-free, it should not become the obvious choice. If you look at the list of top debt-free companies in the article above, you will observe that not all of them are in high demand.

Remember, debt is an important part of a business since it allows it to leverage market opportunities and boost growth. The key lies in finding companies with the optimum balance between debt and growth as opposed to finding debt-free listed companies.

If a company has the ability to manage its debts efficiently and uses it for growth, then such companies are better investment avenues than those with zero debt but restricted growth. Choose wisely. 

Happy Investing!

Disclaimer: The views expressed in this post are that of the author and not those of Groww.

To read the RA disclaimer, please click here

Research Analyst - Bavadharini KS 

Disclaimer

The stocks mentioned in this article are not recommendations. Please conduct your own research and due diligence before investing. Investment in securities market are subject to market risks, read all the related documents carefully before investing. Please read the Risk Disclosure documents carefully before investing in Equity Shares, Derivatives, Mutual fund, and/or other instruments traded on the Stock Exchanges. As investments are subject to market risks and price fluctuation risk, there is no assurance or guarantee that the investment objectives shall be achieved. NBT do not guarantee any assured returns on any investments. Past performance of securities/instruments is not indicative of their future performance.
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