Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!

Mid-caps stocks, like Tata Global Beverages Limited (NSE:TATAGLOBAL) with a market capitalization of ₹164b, aren’t the focus of most investors who prefer to direct their investments towards either large-cap or small-cap stocks. Despite this, commonly overlooked mid-caps have historically produced better risk-adjusted returns than their small and large-cap counterparts. This article will examine TATAGLOBAL’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. Note that this commentary is very high-level and solely focused on financial health, so I suggest you dig deeper yourself into TATAGLOBAL here.

View our latest analysis for Tata Global Beverages

TATAGLOBAL’s Debt (And Cash Flows)

TATAGLOBAL has built up its total debt levels in the last twelve months, from ₹11b to ₹12b , which includes long-term debt. With this growth in debt, TATAGLOBAL currently has ₹16b remaining in cash and short-term investments , ready to be used for running the business. On top of this, TATAGLOBAL has generated cash from operations of ₹2.1b in the last twelve months, leading to an operating cash to total debt ratio of 18%, signalling that TATAGLOBAL’s current level of operating cash is not high enough to cover debt.

Can TATAGLOBAL pay its short-term liabilities?

With current liabilities at ₹15b, it appears that the company has been able to meet these obligations given the level of current assets of ₹45b, with a current ratio of 3.09x. The current ratio is calculated by dividing current assets by current liabilities. However, a ratio above 3x may be considered excessive by some investors, yet this is not usually a major negative for a company.

Does TATAGLOBAL face the risk of succumbing to its debt-load?

With debt at 14% of equity, TATAGLOBAL may be thought of as appropriately levered. TATAGLOBAL is not taking on too much debt commitment, which may be constraining for future growth.

Next Steps:

TATAGLOBAL’s cash flow coverage indicates it could improve its operating efficiency in order to meet demand for debt repayments should unforeseen events arise. However, the company exhibits proper management of current assets and upcoming liabilities. This is only a rough assessment of financial health, and I'm sure TATAGLOBAL has company-specific issues impacting its capital structure decisions. I recommend you continue to research Tata Global Beverages to get a more holistic view of the stock by looking at: