Uncertainty on demand growth seems to be crimping investment.
Private companies were sitting on almost Rs 1,50,000 crore in cash and bank balances as on September 30, unaudited balance sheet data for 580 firms compiled by Business Standard Research Bureau show. The cash in hand has been mostly carry-forward over six months, the rise being a marginal four per cent or Rs 5,850 crore over the Rs 1,44,150 crore as on March.
Only 29 companies hold a large portion of corporate cash balances, with Rs 1,01,800 crore on their balance sheets, 68 per cent of the total for these companies. Reliance Industries has the largest cash balance, at Rs 13,636 crore, while Infosys Technologies is second with Rs 12,722 crore. Tata Motors has the third-largest with Rs 8,889 crore, followed by Sterlite Industries with Rs 7,406 crore and Tata Steel at 7,146 crore.
During the six months to September, the 580 studied here aggregated an increase of Rs 1,06,733 crore (11.5 per cent) in reserves and surpluses through retained profit for the six months and issuance of equity shares by a few others. The borrowing by these companies increased Rs 55,640 crore or 7.9 per cent, while equity capital increased by Rs 2,460 crore or 4.26 per cent through fresh equity and bonus shares.
| CASH CUSHION Cash balance with companies (Rs cr) | |||
| Sept ‘09 | Mar ‘10 | Sep ‘10 | |
| Reliance Ind | 13,636.00 | 13,462.65 | 13,636.00 |
| Infosys Tech | 9,797.00 | 10,556.00 | 12,722.00 |
| Tata Motors | 8,001.42 | 8,743.32 | 8,888.94 |
| Sterlite Inds | 3,034.82 | 3,337.76 | 7,406.00 |
| Tata Steel | 5,922.92 | 6,787.81 | 7,146.58 |
| Hindustan Zinc | 1,437.38 | 927.53 | 4,938.34 |
| JP Associated | 4,429.39 | 3,879.18 | 4,296.89 |
| Wipro | 3,115.90 | 6,487.80 | 3,784.40 |
| TCS | 3,019.63 | 4,718.59 | 3,599.32 |
| Piramal Healthcare | 24.61 | 15.64 | 3,109.43 |
However, investments in fixed assets in the past two financial years and in the first six months of the current one suggests that companies are unlikely to spend the cash on expanding their business, due to continuing uncertainty on demand growth. Even so, the cash balance covers only a third of corporate debt, of Rs 7,63,590 crore. Growth in the fixed assets of these firms was up by only four per cent, or Rs 41,412 crore.
It seems the companies are looking for greater certainty and signs of a permanent increase in sales before they let go their cash hoards. Given low demand and capacity utilisation in certain industries, companies are wary of investing their cash in new capacity. The unaudited balance sheet data show 11.2 per cent rise in inventory in the first six months of this financial year, while investment in subsidiaries and liquid funds increased 7.3 per cent.
Technology companies held the most cash as a sector, at Rs 24,375 crore, followed by refineries with Rs 16,738 crore, construction at Rs 15,610 crore, non-ferrous metals at Rs 12,887 crore, automobiles at Rs 11,770 crore and steel with Rs 10,027 crore, unaudited data suggests. However, hefty cumulative borrowings in construction, refineries, steel and automobiles suggest the cash balances there may be to complement the loan funds.