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Small and large cap stocks are widely popular for a variety of reasons, however, mid-cap companies such as Glenmark Pharmaceuticals Limited (NSEI:GLENMARK), with a market cap of IN₨150.99B, often get neglected by retail investors. However, generally ignored mid-caps have historically delivered better risk adjusted returns than both of those groups. This article will examine GLENMARK’s financial liquidity and debt levels to get an idea of whether the company can deal with cyclical downturns and maintain funds to accommodate strategic spending for future growth. Don’t forget that this is a general and concentrated examination of Amazon’s financial health, so you should conduct further analysis into GLENMARK here. See our latest analysis for Glenmark Pharmaceuticals
How does GLENMARK’s operating cash flow stack up against its debt?
GLENMARK’s debt levels surged from IN₨39.88B to IN₨47.24B over the last 12 months – this includes both the current and long-term debt. With this rise in debt, GLENMARK currently has IN₨10.56B remaining in cash and short-term investments for investing into the business. Additionally, GLENMARK has generated IN₨6.57B in operating cash flow during the same period of time, resulting in an operating cash to total debt ratio of 13.92%, indicating that GLENMARK’s debt is not appropriately covered by operating cash. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In GLENMARK’s case, it is able to generate 0.14x cash from its debt capital.
Can GLENMARK meet its short-term obligations with the cash in hand?
With current liabilities at IN₨27.04B, it appears that the company has been able to meet these commitments with a current assets level of IN₨68.75B, leading to a 2.54x current account ratio. For Pharmaceuticals companies, this ratio is within a sensible range since there’s sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Does GLENMARK face the risk of succumbing to its debt-load?
With a debt-to-equity ratio of 82.54%, GLENMARK can be considered as an above-average leveraged company. This is not uncommon for a mid-cap company given that debt tends to be lower-cost and at times, more accessible. We can check to see whether GLENMARK is able to meet its debt obligations by looking at the net interest coverage ratio. A company generating earnings before interest and tax (EBIT) at least three times its net interest payments is considered financially sound. In GLENMARK’s, case, the ratio of 4.1x suggests that interest is appropriately covered, which means that lenders may be inclined to lend more money to the company, as it is seen as safe in terms of payback.