The number of companies in the BSE 500 Index with a cash surplus hit a 5-year high in fiscal 2014, a feat that analysts say indicates a lack of investment opportunities, and not improved prosperity. As many as 126 companies - excluding those in the banking and financial services sectors which deal in cash - ended the fiscal year with more cash on their books than debt.
The top-10 cash-rich companies comprised the usual suspects from the information-technology sector and state-owned metals and mining firms, with
State-owned companies dominated the top-10 club with five of them being on the list, closely followed by the IT sector with four. Half of the top 10 companies -
Some public sector companies and IT firms have historically been cash rich. In the absence of industrial growth, there have not been many opportunities for investing the surplus cash. Among the companies that didn't have a cash surplus, debt is a big drag for many. The total debt of the 414 non-bank non-financial companies which form the BSE 500 stood at almost five times the cash held by them. Five years ago, this ratio was a little over three times, and this indicates that the overall debt burden is growing faster than cash reserves.
While the total cash pile of the 414 companies grew at a compounded annual growth rate of 8.8% over the last five years to
According to Chokkalingam, some of the money from the cash-rich companies may soon find its way into the economy. "With the possibility of pick-up in economic activity, we shall soon see a repeat of what we saw between the years 2004 and 2007 when cash piles came to be invested in capital expenditure projects," he said.
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