Debt Free Companies in India

In this blog, we will look at the Top 10 Debt-Free Companies in India. These companies can be considered for long term investment.

What is a Debt Free Company:

Zero debt companies are generally strong in fundamentals as they don’t have any interest cost to worry about, which also results in a higher profit margin. During an economic slowdown, many debt-heavy firms’ profits dip owing to falling sales and payment of fixed interest while companies with no debt or less debt need not worry about the same.

Debt-free companies mostly fund their CAPEX through internal accruals and the least preference is equity funding. However, companies have different kinds of risks such as the nature of the industry, business, operations, etc.

Criteria to select Debt Free Companies :

Zero Debt to Equity – The companies with literally zero debt in their balance sheet i.e., the Debt-to-Equity ratio should be absolute zero.

Zero Promoter’s Pledge – The companies with zero pledged shares on its promoter’s holding in the overall shareholding.

5Y Average Return on Equity (ROE) – The companies with more than 20%of Average ROE over the period of 5 years.

Here are the Top 10 Debt Free Companies in India:

Hindustan Unilever Ltd – The large-cap Giant is a market leader in 90% of its businesses. The company’s brands are available across 80 lakh+ stores across India and around 90% of all households in India use one or more of the company’s branded products.

Castrol India Ltd – The Automotive lubricant manufacturing company is maintaining a zero-debt position for more than a decade and an Average EBITDA margin of 20%+ for the past 7 to 10 years.

P&G Hygiene and Healthcare Ltd – P & G Hygiene and HealthCare Ltd. is engaged in the manufacturing and selling of famous branded FMCGs like Pampers, Ariel, Tide, Head & Shoulders, Pantene, Oral B. Whisper, Vicks & Old Spice, etc.

HDFC AMC Ltd – HDFC Asset Management Company (HDFC AMC) is Promoted by HDFC Ltd (52.72% of share), is one of the largest AMCs in India with total assets under management (AUM) of 3,95,476 Cr. as of Mar 2021.

Gillette India Ltd – The company is engaged in the manufacturing and sale of branded packaged FMCGs especially in the grooming and oral care businesses. It commands a 70% market share in the blades and razors segments (Mach-3) and a 28% market share in the toothbrush segment (Oral-B).

CAMS Ltd – Computer Age Management Services (CAMS) is India’s largest registrar & transfer agent (RTA) of mutual funds with 70% market share of MF AUM. This company also maintained a zero-debt position for more than a decade.

Rossari Biotech Ltd – Rossari is engaged in manufacturing specialty chemicals with its focus on three business verticals of home, personal care & performance chemicals (HPPC); textile specialty chemicals (TSC), and animal health & nutrition (AHN). Within the three verticals, it has over 3500 products catering to diverse end-user industries.

CRISIL Ltd – The company is the largest credit rating agency in India having multiple segments like the Rating business, Research business, and Advisory business. On those, rating business is the most Profitable business of the company and accounts for 51% of total profits while contributing only 28% of revenues. This company also maintained a zero-debt position for more than a decade.

L&T Tech. Services Ltd – L&T Tech. Services Ltd (LTTS) is a global leader in Engineering and R&D (ER&D) services. LTTS’ customer base includes 69 Fortune 500 companies and 53 of the world’s top ER&D companies. The company repaid all the debt and acquired a zero[1]debt position in FY21.

IRCTC Ltd – Indian Railway Catering and Tourism Corporation Ltd. (IRCTC) is a wholly-owned subsidiary of Indian Railways, Government of India. It is a Mini Ratna (Category-I Central Public Sector Enterprise) with the objective to upgrade, modernize, professionalize and manage the catering and hospitality services at stations, on trains and other locations, online ticket booking services, packaged drinking water.