Top 100 firms' treasury operations peak

Faced with a declining interest rate regime but bouyant equity markets in the last two years, treasury-savvy companies have been putting more cash into current investments (typically securities with a maturity profile of one year or less).

A survey of the treasury operations of the top 100 cash rich companies shows that their turnover (gross purchases and sales) of current investments hit an all-time high of Rs 2,75,000 crore in 2003-2004, 60 per cent higher than in 2002-2003.

In 2002-2003 the treasury operation of these companies increased by 55 per cent over the previous year, and was pegged at Rs 1,71,832 crore, a compilation of the cash flow data reported in companies' annual reports shows.

These 100 cash rich companies traded heavily in debt mutual funds, government securities and in treasury bills. Almost 90 per cent of the current investments were reported to be in mutual funds and around 10 per cent in other securities.

Riding on hefty 80 per cent returns in the stock markets and decent double digit returns from debt funds, cash rich companies earned Rs 887 crore from the sale of these current investments in 2003-2004, 35 per cent higher than the Rs 657 crore profit on sale of investment in 2002-2003.

A survey of the data also shows that corporates which generate huge amounts of liquid cash in main line operations were the largest traders in liquid instruments.

The list includes Reliance Industries, ITC, Hindustan Lever, Hero Honda, Larsen & Toubro, Maruti Udyog, Tata Steel, Bharti Tele-Ventures and Mahindra & Mahindra. Indeed, these companies account for two-thirds of the total treasury business of the full sample.

Reliance Industries tops the charts with trading aggregating at Rs 60,000 crore in 2003-2004 in mutual fund units, asset-backed notes and government securities. Though it is difficult segregate treasury profits, RIL's profit on the sale of current investment was Rs 93.40 crore in 2003-2004, against Rs 36.31 crore in 2002-2003.

ITC earned Rs 78.16 crore (Rs 47.11 crore) from treasury operations, running into Rs 22,000 crore. Hindustan Lever, which is facing acute competition in the detergents segment, doubled its treasury activities to Rs 22,000 crore in 2003-2004, earning Rs 38.94 crore (Rs 15.58 crore) in these operations.

Bajaj Auto earned Rs 2.64 crore (Rs 2.38 crore) from the purchase and sales of mutual fund units and government securities. Hero Honda earned Rs 106.21 crore (Rs 72.81 crore) from current investments. Maruti Udyog made treasury profits of Rs 3.40 crore (Rs 3.50 crore) while Tata Motors earned Rs 3.98 crore (Rs 6.50 crore) on the sale of investment.

Software companies with hefty cash in hand were active traders, with Infosys Technologies, Wipro and Patni Computer together churning a total of Rs 5,000 crore worth of mutual fund units in 2003-2004. Infosys Technologies earned Rs 17.40 crore, Wipro earned Rs 4.50 crore and Patni Computer earned Rs 5.95 crore on the sale of current investments.