India Inc Enters 2025 With Cash Reserves Of Rs 7.6 Lakh Crore, Up 51% Since Covid

Last Updated:January 03, 2025, 17:37 IST

While global and domestic demand concerns persist, analysts believe strategic investments arising from inorganic opportunities will drive growth.

India Inc’s balance sheets today are among the strongest in years, with leverage significantly reduced.

As India Inc enters 2025 facing several headwinds such as global tariff wars and weakening demand at home, its robust balance sheet is likely to put it in a strong position to tide over these challenges.

According to ACE Equities’ data, the cash reserves of BSE 500 companies (excluding BFSI and oil & gas) stood at Rs 7.68 lakh crore on September 30, 2024.

India Inc’s cash reserves have grown over 51 percent since just before covid (end of FY20), when its cash reserves were at around Rs 5.06 lakh crore, data shows.

Analysts attribute this growth to a buoyant stock market, equity fundraising through qualified institutional placements (QIPs) and IPOs, trends such as increased premiumisation and digitisation leading to higher margins, industry consolidation, and operational prudence.

Stronger balance sheets

According to analysts, the post-pandemic years marked a significant shift in priority for Indian corporates, with companies’ razor sharp focus on deleveraging their balance sheets. The striving for healthier balance sheets was also aided by the post-pandemic demand boom, experts added.

“The Covid pandemic triggered a realisation among corporates to maintain higher liquidity for unforeseen challenges. Simultaneously, consumer behaviour, including post-pandemic revenge buying, boosted company performance and added to cash reserves,” said

Bhavesh Shah, Managing Director and Head of Investment Banking at Equirus.

Shah further highlighted the role of a robust stock market in strengthening balance sheets. “The IPO and QIP rallies enabled companies to deleverage. Debt repayment has become a key objective for IPO fund utilisation, as markets reward companies with debt-free operations,” he said.

Several other factors such as digitisation-led increase in productivity and regulatory changes also helped Indian companies better manage their balance sheets.

“Digitisation has driven efficiency, stringent cost controls have improved productivity, and regulatory changes like the insolvency code have streamlined operations. Additionally, companies prioritised liquidity as a buffer against uncertainties,” said Feroze Azeez, deputy CEO of Anand Rathi Wealth Limited.

While the cost of equity is higher than debt, companies are likely to maintain a balanced mix to optimise financial strategies, he said.

Stronger earnings for export-led businesses in the post-pandemic period coupled with shorter capex cycles also helped, experts said. “Export-driven sectors like IT and pharma experienced super-earning cycles post-Covid. Short-cycle capital spending in areas like renewables and 5G upgrades also led to better IRRs, contributing to cash accumulation,” said Santosh Pandey, president and head of Nuvama Professional Clients Group.

India Inc’s balance sheets today are among the strongest in years, with leverage significantly reduced.

“As of March 2024, the debt-to-EBITDA ratio of BSE 500 companies stands at 2.5x-2.7x compared to 4.5x before Covid. This means companies can repay their debt in 2.5-3 years of earnings — a healthy position,” said Pandey.

Deployment of cash reserves in 2025

While global and domestic demand concerns persist, analysts believe strategic investments such as inorganic opportunities will drive growth.

Pandey highlighted a shift toward short-cycle projects and M&A activity. “Sectors like solar, cloud computing and pharma are focusing on acquisitions rather than building plants from scratch. Companies are prepared to deploy cash as demand slowdown is seen as temporary,” he said.

Equirus’ Shah echoed the sentiment, predicting a balanced approach. “Indian companies will invest in manufacturing capabilities to meet future demand while maintaining a cautious reserve. Inorganic growth through acquisitions will also be a key strategy, especially for companies with robust business models,” Shah said.

According to Azeez, for listed players, spending will depend on demand dynamics. “While FMCG shows mixed trends, with rural areas outperforming urban, EMS is thriving, and cement players are focusing on acquisitions. Unlisted sectors like education, renewables, and transport could see significant investments,” he said.

With slower organic growth anticipated in certain sectors, India Inc is likely to turn to inorganic opportunities. Consolidation across sectors will drive growth, analysts said.

“A clear polarisation exists between companies with strong financials and those struggling. Companies with scale and solid business models will act as consolidators, using funds to acquire smaller players and strengthen their market position,” said Shah

Nuvama’s Pandey added that M&A activity has been strong across sectors, offering exponential growth opportunities. “A strong war chest makes it easier for companies to act quickly in such scenarios,” he said.

Despite challenges such as global tariff wars and a weakening domestic demand environment, India Inc’s strong cash reserves and reduced leverage position it to navigate 2025 with confidence. “The demand slowdown is seen as temporary. Companies are unlikely to hesitate in deploying cash to capitalize on growth opportunities,” Pandey said.

News business India Inc Enters 2025 With Cash Reserves Of Rs 7.6 Lakh Crore, Up 51% Since Covid



_{Images are for reference only.Images and contents gathered automatic from google or 3rd party sources.All rights on the images and contents are with their legal original owners.}