India Inc. seems to be adding to its cash pile, even after the pandemic. Continued drive to optimise costs and reluctance to spend on capacity expansion, given the uncertain demand scenario has helped corporate India increase their cash reserves over the last two years. Reliance Industries tops the list of companies with large cash balances.

A businessline analysis shows that aggregate cash and cash equivalent balances of Nifty500 companies grew 35 per cent from ₹10.6 lakh crore in September 2022 to ₹14.3 lakh crore in September 2024. We have considered cash, bank and current investment figures for this analysis. Companies in the banking, financial services and other services sectors were excluded.

Rising balances

Madan Sabnavis, Chief Economist, Bank of Baroda, says that rising cash balances is a “reflection of companies not putting them to use for investment purposes”.

“Companies are making profits but then not deploying them in projects. With cost of capital also rising, it is not likely that they are borrowing for capex either,” he adds, noting that this trend varies sectorally.

As of September 2024, Reliance Industries alone holds 15 per cent of the total cash and cash equivalents pool of Nifty 500 companies at around ₹2.15 lakh crore. L&T, Tata Motors, TCS and Wipro are other companies with highest cash reserves as of September 2024. Of the top 10 companies with highest cash reserves, Interglobe Aviation, Reliance and Hindustan Aeronautics have grown their cash reserves the most in the 2-year period.

Prashant Tarwadi, Director, India Ratings & Research, says that in the last few years, free cash flow in the corporate sector improved year-on-year as companies reaped the benefits of cost optimisation measures taken post the pandemic. “The cash and cash equivalents are typically put to use for working capital needs, capital expenditure, and servicing debts. In the last few fiscals, companies have largely focused on brownfield projects with most greenfield projects on hold,” he adds.

On Capex

Regarding future outlook, Tarwadi says capex is unlikely to pick up too much pace due to a “lack of visibility” in corporate earnings amid global tariff realignments and domestic demand slowdown.

As per Kinjal Shah, Senior Vice-President and Co-Group Head, Corporate Sector Ratings at ICRA, various factors have aided cash balances of Corporate India including improved demand leading to increased earnings in certain sectors like pharma, healthcare, aviation etc., and a favourable commodity cycle in select industries. “Companies have also started maintaining a war chest of liquidity post Covid to meet any exigencies; there has also been significant fund raising through QIPs and rights issues,” he adds.

A sectoral analysis of the Nifty500 enterprises with over 20 per cent growth in CCE in this two-year period reveals that a majority are from the pharma, IT-software and capital goods (non-electrical) industry. Chemicals, power, healthcare, realty, auto & auto ancillaries and FMCG round out the top 10 sectors with maximum incremental cash.

Published on February 4, 2025