50 cash rich companies

What is cash rich company?Cash and bank balances indicate the amount of cash that a company has on its books at a specific point in time. The position of cash and bank balances net of debt is one of the indicators of financial strength and liquidity of the company. Cash and bank balances include balance with bank, term deposit with banks and cash in hand/others.

Importance of cash rich companyAnalysts suggest that a cash rich company is a sign of financial strength while a small cash position is a possible caution or warning sign. The cash rich companies have an edge over cash strapped companies as cash can be used to fund operations and acquisitions, to buyback shares and to repay debt. It also helps the company to survive in torrid times of recession. A dark side of cash rich company is that too large of a cash position can often signal waste of funds as the funds are placed idle or produce very modest return.

Data CoverageWe have taken all the listed companies on the Bombay Stock Exchange. We have taken only those companies whose cash value net of debt is greater than Rs 300 crore and sorted the top 50. We have not taken the investment value into consideration since some companies have invested in government bonds or group companies.

Interestingly, 8 companies out of top 10 cash rich companies by value were PSU companies.

                                                                     * All figures (Rs in Cr)

Company	Investments	Cash and	Total	Net	Market
		Bank Bal.	Debt	Cash	Cap
BHEL	6	10329	167	10163	111713
SAIL	37	18486	8666	9820	73108
NMDC	72	9740	-	9740	144910
Infosys	-	9695	-	9695	137855
M T N L	465	4803	-	4803	5868
Rajesh Exports	385	5537	1951	3587	2066
Natl. Aluminium	896	2869	-	2869	23440
MMTC	399	6022	3209	2814	168240
Hind.Zinc	6929	2719	9	2710	34645
Bharat Electron	-	2658	2	2656	11450
Cairn India	171	6527	4356	2171	49854
TCS	1614	2698	563	2135	117598
Engineers India	151	1921	-	1921	6326
Container Corpn	168	1767	49	1718	14742
Oracle Fin.Serv.	1	1549	-	1549	15173
Sun Pharma.	1859	1669	179	1490	24953
Hind. Unilever	288	1864	434	1430	58484
Siemens	245	1322	11	1311	18836
Neyveli Lignite	722	5482	4210	1272	22909
Maruti Suzuki	3277	1987	759	1228	47938
ITC	2507	1318	187	1132	88101
Eicher Motors	6	1260	166	1094	1527
PTC India	533	1052	20	1032	2597
Edelweiss Cap.	270	1721	762	959	3387
HCL Technologies	1377	1011	55	956	22947
Glaxosmit Pharma	730	957	6	951	12694
Bosch	867	1071	264	806	13153
Lak. Mach. Works	104	627	-	627	1766
Hinduja Global	1	665	87	578	1038
India Infoline	315	627	52	575	4248
Ambuja Cem.	328	852	289	563	15192
Pfizer	1	544	-	544	2492
Motil.Oswal.Fin.	49	543	0	543	2444
Tech Mahindra	435	538	-	538	11108
Ingersoll-Rand	0	515	-	515	1038
ACC	517	991	482	509	15905
Aventis Pharma	5	497	-	497	3405
GlaxoSmith C H L	-	471	-	471	4867
Apar Inds.	0	611	161	450	497
Anant Raj Inds	309	626	210	416	4295
Hind.Copper	-	529	113	415	21132
JM Financial	603	525	134	391	3203
Thermax	144	373	4	369	6642
Alstom Projects	-	368	1	367	3820
Indiabulls Sec.	52	462	112	350	1348
A B B	61	348	0	348	16987
Bajaj Finserv	6595	642	311	331	4271
Heidelberg Cem.	0	338	10	328	1015
Dredging Corpn	30	332	6	326	1409
Info Edg.(India)	18	322	0	322	1914

Source: Capitaline

Disclaimer: Datawatch is purely intended to reveal interesting statistics. Moneycontrol sources all price information from BSE/NSE and company information from Religare Technova. Moneycontrol is not responsible for inaccuracy/non-updation of data. There is no intention whatsoever to arrive at any conclusion or recommend any stocks or sectors. Please consult your financial advisor before taking any investing decisions.

Cash-rich cos back to investing in liquid MFs

India Inc seems to be taking a more active approach to managing its surplus cash, going by the increase in the amounts that it invests in liquid mutual funds. Consider this: Infosys Technologies, which had no investments in liquid mutual funds as of March 2009, had Rs 2,518 crore invested in liquid funds by March 2010.

The story is similar with Patni Computer, which has seen its investments in liquid mutual funds more than double to Rs 1,605 crore by March this year.

Other cash-rich companies outside of the IT sector such as ITC, Reliance Industries and Ambuja Cements have also seen sharp (48-357 per cent) increases in the sums parked with liquid mutual funds.

But deposits with banks still remain the most preferred mode of holding surpluses for the larger companies, accounting for over half their cash balances. For companies such as Infosys, Crompton Greaves,Ambuja Cements, Polaris and MindTree, the proportion of their cash and investments parked in liquid mutual funds has risen 5-17 percentage points.

Others in the IT pack, such as Wipro and TCS, too have seen increased investments in mutual funds, though not to the same extent. The key attraction may be that liquid mutual funds allow companies to withdraw at any time. They are also more tax-efficient than bank deposits. Speaking to Business Line, Mr R. Srikanth, Chief Financial Officer of Polaris Software, said, “Liquid mutual funds and fixed maturity plans (FMPs) give a (post-tax) yield of 5.5-6.78 per cent, which is much higher than fixed deposits.” He added that going forward, the company would invest more in liquid mutual funds and FMPs and only then, would consider bank deposits.

Asked about the concerns (in late 2008 and early 2009) over the credit risk attached to the portfolios of fixed maturity plans, Mr Srikanth said, “Indian AMCs are well regulated and structured and they take informed decisions based on ratings of bonds and debentures; so, there is very limited risk on that front.”

Government bonds Even as some companies have opted to shift their surpluses from banks to more actively managed options such as mutual funds, multinationals seem to be continuing to take a conservative stance. Companies such as GSK Pharma and Siemens preferred to invest their surplus mainly in bank deposits during 2009-10.

Apart from deposits, other key investments for corporate treasuries were debentures and bonds, usually from Government entities or PSUs, where larger companies have more than doubled allocations. Companies such as ITC, RIL and GSK Pharma invested in bonds of Nabard, Indian Railway Finance Corporation, IIFCL, HDFC and LIC Housing Finance. Reliance Industries also invests in the debentures of global financial institutions based in India. There are also one-off cases such as TCS subscribing to Rs 1,000 crore worth debentures from Tata Sons, while Reliance Industries invested Rs 700 crore in optionally convertible preference shares of Shinano Retail.

6 cash rich companies

Following are the 6 cash rich companies from BSE 100, BSE Midcap and BSE small cap indices. The cash rich companies reflect the levels of cash they are sitting on as on Mar. 31, 2009.

1) Reliance Industries (RIL):

Market capitalization: Rs 3,578,062.53 million
Index: Sensex
1-year return of RIL (as on Dec. 31, 2009): 77.10%
Sensex return for 1-year (as on Dec. 31, 2009): 81.03%
Price earnings (P/E) ratio: 24.57
Price to book ratio (P/B): 2.52

Reliance Industries (RIL), India`s largest private sector enterprise, with businesses in the energy and materials value chain is the No. 1 company with the highest cash levels of around Rs 221,765 million as on Mar. 31, 2009. On January 4, the company announced it has raised nearly Rs 26.75 billion for the same by selling treasury shares held by Petroleum Trust at an average price of about Rs 1,035 a share. In September 2009, it raised around Rs 31 billion by selling 15 million treasury shares held by Petroleum Trust.

2) Steel Authority of India (SAIL):

Market capitalization: Rs 1,029,502.2 million
Index: BSE 100
1-year return of SAIL (as on Dec. 31, 2009): 210.71%
BSE100 return for 1-year (as on Dec. 31, 2009):  85.03%
Price earnings (P/E) ratio: 19.33
Price to book ratio (P/B): 6.04

The largest integrated iron and steel producer in India, Steel Authority of India`s (SAIL) cash levels stood at Rs 182,285 million as on Mar. 31, 2009. It reported 32% growth in sales at 1.3 million tons in December 2009.  The sales in the third quarter ended December 2009 grew by 23% over the corresponding period last year due to increase in sale of products consumed by the construction industry.


3) Mahanagar Telephone Nigam (MTNL):

Market capitalization: Rs 53,014.5 million
Index: BSE 100, BSE Midcap
1-year return of MTNL (as on Dec. 31, 2009): -6.71%
BSE 100 return for 1-year (as on Dec. 31, 2009): 81.03%
BSE Midcap return for 1-year (as on Dec. 31, 2009): 107.66%
Price earnings (P/E) ratio: NA
Price to book ratio (P/B): 0.47

Mahanagar Telephone Nigam (MTNL), a leading telecom service provider has cash position of Rs 48,027.98 as on Mar. 31, 2009. MTNL offers a complete range of telecommunication services including dial-up, broadband, home and mobile telephony, ISDN and leased line services. Recently, the Prime Minister`s IT advisor Sam Pitroda said the government is not planning to merge MTNL and BSNL. ``There is no move to merge BSNL and MTNL,`` he said.


4) Shipping Corporation of India (SCI):

Market capitalization: Rs 68,239.55 million
Index: BSE Midcap
1-year return of SCI (as on Dec. 31, 2009): 85.22%
BSE Midcap return for 1-year (as on Dec. 31, 2009): 107.66%
Price earnings (P/E) ratio: 12.64
Price to book ratio (P/B): 0.89


Shipping Corporation of India (SCI), owned by government of India, operates and manages vessels that services both national and international lines has cash of Rs 26,728.30 million as on Mar. 31, 2009. SCI plans to acquire three new container ships in 2010 along with its existing JV partner Mediterranean Shipping Company (MSC) and has set aside USD 200-225 million to fund these purchases.


5) JSL:

Market capitalization: Rs 19,934.49 million
Index: BSE Small cap
1-year return of JSL (as on Dec. 31, 2009): 248.37%
BSE Small cap return for 1-year (as on Dec. 31, 2009): 126.91%
Price earnings (P/E) ratio: NA
Price to book ratio (P/B): 1.23


JSL, a multi-billion, multi-national and multi-product steel conglomerate has cash positions of Rs 6,572.19 million as on Mar. 31, 2009. JSL is likely to increase stainless steel manufacturing capacity to about 2.5 MT by March 2014 on the back of a 1.6 MT greenfield plant it would set up in Orissa, making it the largest producer in India.

6) Ingersoll-Rand (India)

Market capitalization: Rs 11,312.39 million
Index: BSE Small cap
1-year return of Ingersoll-Rand (as on Dec. 31, 2009): 49.80%
BSE Small cap return for 1-year (as on Dec. 31, 2009): 126.91%
Price earnings (P/E) ratio: 24.31
Price to book ratio (P/B): 2.55

Ingersoll-Rand (India) focused on the major global markets of climate control, industrial technology, infrastructure development and security and safety has cash levels of Rs 5,148.95 million as on Mar. 31, 2009. Recently, the company has launched several models in its reciprocating air compressor line, extending its offering of Type-30 air compressors.

Cash-rich cos back to investing in liquid MFs

K.Venkatasubramanian

BL Research Bureau

India Inc seems to be taking a more active approach to managing its surplus cash, going by the increase in the amounts that it invests in liquid mutual funds. Consider this: Infosys Technologies, which had no investments in liquid mutual funds as of March 2009, had Rs 2,518 crore invested in liquid funds by March 2010.

The story is similar with Patni Computer, which has seen its investments in liquid mutual funds more than double to Rs 1,605 crore by March this year.

Other cash-rich companies outside of the IT sector such as ITC, Reliance Industries and Ambuja Cements have also seen sharp (48-357 per cent) increases in the sums parked with liquid mutual funds.

But deposits with banks still remain the most preferred mode of holding surpluses for the larger companies, accounting for over half their cash balances. For companies such as Infosys, Crompton Greaves,Ambuja Cements, Polaris and MindTree, the proportion of their cash and investments parked in liquid mutual funds has risen 5-17 percentage points.

Others in the IT pack, such as Wipro and TCS, too have seen increased investments in mutual funds, though not to the same extent. The key attraction may be that liquid mutual funds allow companies to withdraw at any time. They are also more tax-efficient than bank deposits.

Speaking to Business Line, Mr R. Srikanth, Chief Financial Officer of Polaris Software, said, “Liquid mutual funds and fixed maturity plans (FMPs) give a (post-tax) yield of 5.5-6.78 per cent, which is much higher than fixed deposits.” He added that going forward, the company would invest more in liquid mutual funds and FMPs and only then, would consider bank deposits.

Asked about the concerns (in late 2008 and early 2009) over the credit risk attached to the portfolios of fixed maturity plans, Mr Srikanth said, “Indian AMCs are well regulated and structured and they take informed decisions based on ratings of bonds and debentures; so, there is very limited risk on that front.”

Government bonds

Even as some companies have opted to shift their surpluses from banks to more actively managed options such as mutual funds, multinationals seem to be continuing to take a conservative stance. Companies such as GSK Pharma and Siemens preferred to invest their surplus mainly in bank deposits during 2009-10.

Apart from deposits, other key investments for corporate treasuries were debentures and bonds, usually from Government entities or PSUs, where larger companies have more than doubled allocations. Companies such as ITC, RIL and GSK Pharma invested in bonds of Nabard, Indian Railway Finance Corporation, IIFCL, HDFC and LIC Housing Finance. Reliance Industries also invests in the debentures of global financial institutions based in India. There are also one-off cases such as TCS subscribing to Rs 1,000 crore worth debentures from Tata Sons, while Reliance Industries invested Rs 700 crore in optionally convertible preference shares of Shinano Retail.

Value in cash

Cash management is critical to any business. A cashrich firm can create value for shareholders by buying new assets, paying dividends and repaying short-term liabilities. The most commonly used ratio to analyse stocks is earnings per share (EPS), but it ignores the cash position of the company. This is listed in the income statement and is also termed as the basic EPS. However, basic EPS has limitations as it is based on net earnings, which can be easily inflated through adjustments to non-cash expenses (depreciation). Basic EPS is a vital constituent of the widely used PE ratio, so analysing firms through this alone can be misleading.

The deception caused by manipulated earnings can be overcome by considering basic EPS along with a variant called cash EPS. The cash EPS is calculated by dividing the operational cash flow of the firm by the number of outstanding shares. Some analysts also calculate it by adding depreciation and other intangible assets like goodwill and amortisation to the net profit, and then dividing the sum by the number of outstanding shares.

Valued Information
Cash EPS is derived from the cash flow statement of a company, which breaks up the cash flow into operating, financing and investing activities. Cash EPS gives the net result of the cash inflow and outflow of a company's daily operational activities. Cash flows are difficult to manipulate and, therefore, significant insights into a company’s affairs can be gained if we analyse the cash EPS and basic EPS.

A positive cash EPS implies that the company has more operating cash inflow than outflow, though it does not necessarily mean that it is generating profits. However, if the cash EPS is consistently high, it indicates that the firm is producing excess operating cash after deducting expenses pertaining to sales. While the basic EPS and cash EPS should be analysed together, there could be divergences. One may be positive while the other could be negative. Investors need to be wary of companies which have a negative cash EPS.

When alarm bells should ring
For identifying a good company, the basic EPS and cash EPS should always be analysed over a period of time. A company is considered superior if its cash EPS is consistently higher than its basic EPS. On the other hand, an in-depth investigation is required for companies where the cash EPS is consistently lower than the basic EPS.

A cash EPS which is constantly negative is not a good sign. Investors need to be vigilant when a company's basic EPS is positive but its cash EPS is negative. The reasons for this divergence could be unsold inventory or high account receivables. Since there is always a risk of account receivables turning into bad debts, investors should be cautious if such a situation arises within a company.

On the other hand, investors need not worry if the basic EPS is negative as long as the cash EPS is positive. The negative basic EPS could be due to depreciation and other non-cash expenses.

Top 20 cash rich companies

In the current scenario, where every event is marked with uncertainties and good companies are available at never-seenbefore valuations, we decided to conduct an analysis based on
cash balances with the companies.

In this approach, we have undertaken the following steps:

1. We chose BSE 500 (excluding banking stocks) as our universe, thereby covering ~84% of the BSE market capitalization.

2. We ranked the companies on the basis of Net Cash Balance as a percentage of Market Capitalization.

3. In step 2, we found 147 companies to be net cash positive as per the last audited results. The remaining companies were excluded from further analysis.

4. Thereafter, we removed the companies with a market capitalization of less than Rs 2,000 crore. After this, we were left with 20 companies.

5. The top 8 (on the basis of ranks in step 2) of these 20 companies have been presented in this report, alongwith our views.

The Top 8

• Hindustan Zinc
• NALCO
• Bharat Electronics
• MTNL
• Neyveli Lignite Corporation
• Satyam Computers
• Thermax
• Maruti Suzuki

50 cash rich companies

In today's Datawatch we look at stocks that carry a substantial cash and bank balance in their books.

What is cash rich company?
Cash and bank balances indicate the amount of cash that a company has on its books at a specific point in time. The position of cash and bank balances net of debt is one of the indicators of financial strength and liquidity of the company. Cash and bank balances include balance with bank, term deposit with banks and cash in hand/others.

Importance of cash rich company
Analysts suggest that a cash rich company is a sign of financial strength while a small cash position is a possible caution or warning sign. The cash rich companies have an edge over cash strapped companies as cash can be used to fund operations and acquisitions, to buyback shares and to repay debt. It also helps the company to survive in torrid times of recession. A dark side of cash rich company is that too large of a cash position can often signal waste of funds as the funds are placed idle or produce very modest return.

Data Coverage
We have taken all the listed companies on the Bombay Stock Exchange. We have taken only those companies whose cash value net of debt is greater than Rs 300 crore and sorted the top 50. We have not taken the investment value into consideration since some companies have invested in government bonds or group companies.

Interestingly, 8 companies out of top 10 cash rich companies by value were PSU companies.

* All figures (Rs in Cr)

Company	Investments	Cash and	Total	Net	Market
		Bank Bal.	Debt	Cash	Cap
BHEL	6	10329	167	10163	111713
SAIL	37	18486	8666	9820	73108
NMDC	72	9740	-	9740	144910
Infosys	-	9695	-	9695	137855
M T N L	465	4803	-	4803	5868
Rajesh Exports	385	5537	1951	3587	2066
Natl. Aluminium	896	2869	-	2869	23440
MMTC	399	6022	3209	2814	168240
Hind.Zinc	6929	2719	9	2710	34645
Bharat Electron	-	2658	2	2656	11450
Cairn India	171	6527	4356	2171	49854
TCS	1614	2698	563	2135	117598
Engineers India	151	1921	-	1921	6326
Container Corpn	168	1767	49	1718	14742
Oracle Fin.Serv.	1	1549	-	1549	15173
Sun Pharma.	1859	1669	179	1490	24953
Hind. Unilever	288	1864	434	1430	58484
Siemens	245	1322	11	1311	18836
Neyveli Lignite	722	5482	4210	1272	22909
Maruti Suzuki	3277	1987	759	1228	47938
ITC	2507	1318	187	1132	88101
Eicher Motors	6	1260	166	1094	1527
PTC India	533	1052	20	1032	2597
Edelweiss Cap.	270	1721	762	959	3387
HCL Technologies	1377	1011	55	956	22947
Glaxosmit Pharma	730	957	6	951	12694
Bosch	867	1071	264	806	13153
Lak. Mach. Works	104	627	-	627	1766
Hinduja Global	1	665	87	578	1038
India Infoline	315	627	52	575	4248
Ambuja Cem.	328	852	289	563	15192
Pfizer	1	544	-	544	2492
Motil.Oswal.Fin.	49	543	0	543	2444
Tech Mahindra	435	538	-	538	11108
Ingersoll-Rand	0	515	-	515	1038
ACC	517	991	482	509	15905
Aventis Pharma	5	497	-	497	3405
GlaxoSmith C H L	-	471	-	471	4867
Apar Inds.	0	611	161	450	497
Anant Raj Inds	309	626	210	416	4295
Hind.Copper	-	529	113	415	21132
JM Financial	603	525	134	391	3203
Thermax	144	373	4	369	6642
Alstom Projects	-	368	1	367	3820
Indiabulls Sec.	52	462	112	350	1348
A B B	61	348	0	348	16987
Bajaj Finserv	6595	642	311	331	4271
Heidelberg Cem.	0	338	10	328	1015
Dredging Corpn	30	332	6	326	1409
Info Edg.(India)	18	322	0	322	1914

Source: Capitaline

Disclaimer: Datawatch is purely intended to reveal interesting statistics. Moneycontrol sources all price information from BSE/NSE and company information from Religare Technova. Moneycontrol is not responsible for inaccuracy/non-updation of data. There is no intention whatsoever to arrive at any conclusion or recommend any stocks or sectors. Please consult your financial advisor before taking any investing decisions.