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There are a number of reasons that attract investors towards large-cap companies such as MMTC Limited (NSEI:MMTC), with a market cap of ₹64.60B. One reason being its ‘too big to fail’ aura which gives it the appearance of a strong and stable investment. But, the key to extending previous success is in the health of the company’s financials. I will provide an overview of MMTC’s financial liquidity and leverage to give you an idea of MMTC’s position to take advantage of potential acquisitions or comfortably endure future downturns. Remember this is a very top-level look that focuses exclusively on financial health, so I recommend a deeper analysis into MMTC here. View our latest analysis for MMTC
How does MMTC’s operating cash flow stack up against its debt?
MMTC has shrunken its total debt levels in the last twelve months, from ₹4.65B to ₹4.40B , which is made up of current and long term debt. With this debt repayment, MMTC’s cash and short-term investments stands at ₹6.24B , ready to deploy into the business. Moreover, MMTC has produced cash from operations of ₹2.73B in the last twelve months, resulting in an operating cash to total debt ratio of 62.00%, meaning that MMTC’s operating cash is sufficient to cover its debt. This ratio can also be interpreted as a measure of efficiency for unprofitable companies since metrics such as return on asset (ROA) requires a positive net income. In MMTC’s case, it is able to generate 0.62x cash from its debt capital.
Can MMTC meet its short-term obligations with the cash in hand?
At the current liabilities level of ₹44.59B liabilities, the company has been able to meet these commitments with a current assets level of ₹51.89B, leading to a 1.16x current account ratio. For Trade Distributors companies, this ratio is within a sensible range as there’s enough of a cash buffer without holding too capital in low return investments.
Does MMTC face the risk of succumbing to its debt-load?
With a debt-to-equity ratio of 36.66%, MMTC’s debt level may be seen as prudent. MMTC is not taking on too much debt commitment, which may be constraining for future growth. MMTC’s risk around capital structure is low, and the company has the headroom and ability to raise debt should it need to in the future.
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MMTC’s debt level is appropriate for a company its size, and it is also able to generate sufficient cash flow coverage, meaning it has been able to put its debt in good use. In addition to this, the company exhibits proper management of current assets and upcoming liabilities. Keep in mind I haven’t considered other factors such as how MMTC has been performing in the past. You should continue to research MMTC to get a more holistic view of the stock by looking at: