Companies with low debt and strong balance sheet have more stable cash flows and yield better return for investors. In tumbling economy ,companies with huge loans are facing problems in servicing debt as their profitability and cash flow are under pressure. But companies with higher cash positions have flexibility to fund growth and expansion plans.
Shares of companies with lesser debt are traded at 20 -50% higher price in comparison to price a year ago. Where as it is seen that companies with higher debt burden did not performed well in last one year and their share price fell 20-40% within a year. I want to take the example of good reputed Indian companies with higher debt burden. The share price of these companies has taken a fall of nearly 20-40% within a year.name of these companies are Adani power , Adani Ent ,Bharti Airtel , Reliance Communication etc.
I think equity investors do not prefer companies with higher debt burden.