# Off Balance Sheet Debt

_Systematic Investing . 2026-06-05 . By Tanmay Kurtkoti. Educational, illustrative, not advice._

A friend sent me an investor deck last week. Net debt to EBITDA of 1.2. Lightly geared, he said. Clean balance sheet. Why would you worry about this one.

So I opened the notes to the accounts. The borrowings line he was reading off turned out to be about half the company's actual claims on cash.

Here is the thing about a net-debt number. It counts borrowings. Just borrowings. But a business carries obligations that behave exactly like debt and do not sit on the borrowings line. Lease liabilities get parked under other financial liabilities. Supply-chain financing, where a bank pays the company's suppliers and the company repays the bank later, gets tucked into trade payables and looks like ordinary working capital. Guarantees and disputed tax claims live in the notes as contingent liabilities, off the face of the balance sheet entirely.

Every one of those is a fixed claim on the same cash flow. A schedule. A counterparty who gets paid before the equity holder sees a rupee. Different line, same economics.

Run the illustrative numbers. Reported net debt 1200 crore on EBITDA of 1000, so 1.2 times. Add lease liabilities of 900 and supply-chain financing of 600, both behaving like debt, and you are at 2700 crore. That is 2.7 times. Same company, same quarter, more than double the gearing once you stop reading only the line that was put in front of you. And the 1500 crore of contingent liabilities in the notes is not even in that figure yet.

None of this is hidden, to be clear. It is all disclosed, sitting in the notes a few pages back. It is just not in the one ratio the deck leads with.

The discipline is simple. Read the notes, not just the ratio. Treat a liability that behaves like debt as debt. And add it back on both companies before you call one lightly geared and the other heavy, because a business that leases its plants and one that owns them are not different by accident.

The leverage ratio is the headline. The notes are the balance sheet.

How to read a balance sheet like a quant, in plain English: https://rupeecase.com/learn/

(Illustrative figures, educational only. Not investment advice.)