A substantial chunk of money borrowed by India Inc from overseas markets last year to bankroll its expansion plans has been parked with commercial banks.
An analysis of the balance sheets of 700 companies shows that cash balance of these corporates increased five-fold to Rs 16,040 crore (Rs 160.40 billion) in 2004-05 from Rs 3,256 crore (Rs 32.56 billion) in 2003-04.
Reliance Energy, Tata Motors, Hindalco Industries, Tata Chemicals, Wockhardt, Ashok Leyland and Mahindra & Mahindra, and many others, which mobilised funds through external commercial borrowings or foreign currency convertible bonds, have kept Rs 10,800 crore (Rs 108 billion) with banks.
The chief financial officer of a large manufacturing company told Business Standard,"Most companies rushed to raise money last year fearing a hike in interest rates. However, the funds raised could not be invested overnight since investment plans of these firms are still on the drawing board. We will see more capital investments during the current financial year."
The cash balance of Reliance Energy swelled to Rs 6,045 crore (Rs 60.45 billion) in 2004-05 from Rs 221 crore (Rs 2.21 billion) in 2003-04. The company mobilised Rs 1,000 crore (Rs 10 billion) from overseas borrowings and Rs 650 crore (Rs 6.5 billion) from the domestic market through short-term commercial papers.
Besides, it gained Rs 579 crore (Rs 5.79 billion) as share premium on conversion of FCCBs. In 2004-05, the company liquidated Rs 1,700 crore (Rs 17 billion) worth of assets-backed notes of ICICI Bank.
Tata Motors' cash in hand increased to Rs 2,005 crore (Rs 20.05 billion) in 2004-05 from Rs 770 crore (Rs 7.7 billion) in 2003-04. This is largely on account of a FCCB issue of Rs 1,700 crore and a premium of Rs 541 crore (Rs 5.41 billion) received on conversion of earlier FCCBs. The company used its cash flow for repaying long-term debt and loans to associates companies for purchase of fixed assets.
India Inc mobilised as much as Rs 31,600 crore (Rs 316 billion) in 2004-05 through retained profits for the year, debts and rights issues of equity shares. Over 50 per cent of this fund have been parked with banks, 24 per cent in plant and machinery, over 9 per cent in capital works in progress and the remaining 16 per cent in investments.
These 700 companies have Rs 33,000 crore (Rs 330 billion) worth of cash in bank accounts at the end of financial year 2004-05. Their bank deposits account for almost one-third of their aggregate borrowing of Rs 1,00,000 crore (Rs 1000 billion). In comparison, these 700 firms had kept Rs 17,105 crore (Rs 171.05 billion) with banks accounting for 21 per cent of their borrowings in 2003-04.
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