How to Find Debt-Free Companies in India?
Debt is a crucial factor to check before investing in any company. While zero debt on a company validates its financial health, on the other hand, a heavy debt on the company can be taken as a sign of troublesome company and to stay away from it.
A low debt company can enjoy a higher profit margin and higher solvency. On the contrary, high debt companies have to pay high interest and hence have a higher cost of capital. Overall, huge debt restricts a company from expanding and decreases profits.
A few of the top debt-free companies in India are TCS, Infosys, Maruti Suzuki, ITC, Hero motocorp, Titan company, etc.
In this article, we’re going to explain how you can find debt-free companies in India using the Trade Brains Screener tool. Moreover, you will be able to learn the strategies and find debt-free stocks within minutes by following the step-by-step guide discussed here.
What is Debt to Equity Ratio?
The debt-to-equity ratio measures the relationship between the amount of capital that has been borrowed (i.e. debt) and the amount of capital contributed by shareholders (i.e. equity).
Debt to Equity Ratio =(Total Liabilities)/(Total Shareholder Equity)
Generally, as a firm’s debt-to-equity ratio increases, it becomes riskier. Companies with zero debt to equity mean that they don’t have any debt and manage the company on their equity and reserves & surplus smoothly. They don’t have any pressures of liabilities.
A lower debt-to-equity number means that a company is using less leverage and has a stronger equity position. As a thumb rule, invest in companies with debt to equity ratio less than 0.5 as it means that the debts are very less than the equity. This tells us that these are very well-managed companies. Moreover, companies with a debt-to-equity ratio of more than 1 are risky and should be considered carefully before investing.
How to find Debt Free companies in India using Trade Brains Screener?
Here is exactly what you need to do to find the list of debt-free companies in India using the Trade Brains Screener website:
- Go to the Trade Brains Screener.
2. Log in to the portal using your email or Google account.
3. In the Screener Filters, Select the following filter
Debt to Equity = 0
5. Run the filter by clicking on ‘Run Filter’.
6. You will get the list of all the debt-free companies in India.
Further, You can also customize this search.
For example, if you want to find the large-cap companies (with market capitalization > 50,000 crores) and debt to equity ratio less than 0.5, you can write the following in query builder:
Debt to equity < 0.5 AND
Market capitalization > 50000
This will give you the list of all the extremely large-cap companies with a Debt to Equity ratio of less than 0.5.