Debt to Equity Ratio: Meaning, Formula and Ideal Ratio
Debt to equity tells you how much a company has borrowed for every ₹100 its owners have in the business.
The formula
Owners' money = share capital + reserves (also called net worth)
Example: Navin Fluorine in FY26 had a debt to equity ratio of 0.32. That is ₹32 borrowed for every ₹100 of the owners' money.
Where 24 companies stand
Lower means less borrowing. Many investors are comfortable below 1. 24 of these 24 companies are below 1.
Debt to equity, FY26. Lowest first.
Borrowing to build a plant
Navin Fluorine borrowed while it was building new plants. Its debt to equity went from almost nothing to 0.57 in FY24. By FY26, when the new plants were earning, it had come down to 0.32.
Company: Navin Fluorine. Debt to equity each year. The same plant-building years show up in its ROCE.
The ratio can fall from both ends
Sai Life's debt to equity was 1.05 in FY23. Between FY24 and FY25, its borrowings fell from ₹928 cr to ₹352 cr, and the owners' money rose from ₹975 cr to ₹2,128 cr. Less debt on top and more equity below both push the ratio down. By FY26, it was 0.12.
Company: Sai Life. Debt to equity each year.
Three ways debt to equity fools you
Check a company
Debt to equity ratio: common questions
What does the debt to equity ratio mean?
It tells you how much a company has borrowed for every ₹1 its owners have in the business. A ratio of 0.5 means ₹50 of borrowing for every ₹100 of the owners' money.
What is the debt to equity ratio formula?
Debt to equity = total borrowings ÷ shareholders' equity (share capital plus reserves, also called net worth).
What is an ideal debt to equity ratio?
Many investors are comfortable below 1, and prefer much lower for manufacturing companies. It depends on the business: a company with steady cash can carry more debt safely than one with uneven profits.
What does a negative debt to equity ratio mean?
It means equity is negative: the company's losses over the years have wiped out more than the owners put in. That is a serious warning sign, not a sign of low debt.
What should the debt to equity ratio be in the share market?
There is no single rule. Compare a company with others in its sector, check whether its debt is rising or falling, and check whether its profit easily covers the interest it pays.