Five debt-free stocks trade at premium valuations, Mint reports
Low-debt companies like Divi's Laboratories and Trent command high multiples despite having zero debt-to-equity ratios.
According to a report by Mint, several debt-free companies in India are currently trading at premium valuations. While low-debt companies often possess stronger balance sheets and greater financial flexibility, high valuation multiples reflect significant market expectations for future growth.
Pharmaceutical manufacturer Divi's Laboratories maintains a debt-to-equity ratio of zero. However, the company trades at a price-to-earnings (PE) multiple of 86, which is higher than the 42.3 recorded by the BSE Healthcare index. Its price-to-book (PB) ratio of 13.6 also exceeds the sector average of 7.49.
In the first quarter of fiscal year (FY27), Divi's Laboratories reported a consolidated total income of ₹ 31.44 billion, up from ₹ 25.29 billion in the previous year. Profit after tax for the period rose to ₹ 9.02 billion from ₹ 5.45 billion.
Tata Group company Trent also has a debt-to-equity ratio of zero but trades at a PE multiple of 82.4, compared to 19.2 for the Nifty 50. Trent reported Q1FY27 revenue of ₹ 57.55 billion, an 18 per cent year-on-year increase, while net profit rose 22 per cent to ₹ 5.18 billion.
SBI Life Insurance, promoted by State Bank of India, is another debt-free firm trading at a premium to the Nifty 50. The company reported that new business premium rose 23 per cent to ₹ 89.1 billion in Q1FY27, and its value of new business (VNB) increased 29 per cent to ₹ 14.1 billion.