India Inc takes a shine to funds

Companies seem to be getting averse to risk in the financial markets. Flush with funds, they are investing more in mutual fund schemes, money-market schemes in particular, than in individual stocks and bonds.

The investment pattern data of 268 companies, collected from their annual reports in 2003-04, show that these companies have hiked their mutual fund investments by 93 per cent during the year.

They poured Rs 9,249 crore (Rs 92.49 billion) into mutual-fund schemes during 2003-04, Rs 4,786 crore (Rs 47.86 billion) upfront in the preceding year.

While total investments by the sample companies increased from Rs 25,684 crore (Rs 256.84 billion) to Rs 39,967 crore (Rs 399.67 billion), Rs 17,473 crore (Rs 7,437 crore) were invested in subsidiaries and other group firms, while the balance Rs 13,245 crore (Rs 13,461 crore) were put in equities, debentures and others.

Though the absolute value of the three kinds of investments has risen in absolute terms, as percentage of total investments, equity and bond investments have declined.

In 2003-04, the companies put 23.13 per cent of the Rs 39,967 crore total investments in mutual funds, higher than the 18.63 per cent in the preceding year. However, the share of investments in shares, debentures and others declined from 52.41 per cent to 33.14 per cent.

Although shares staged a stunning performance in 2003 (the Sensex returned 73 per cent in that year), companies have parked most of their cash in mutual funds.

There are two reasons for this. One, money-market

mutual funds have posted better returns than any other financial asset. Moreover, firms stayed away from the stock market after losing a packet by investing in shares.

Wipro Technologies, which earned a net profit of Rs 914.88 crore (Rs 9.15 billion) in 2003-04, tops the list of companies with investments in mutual funds. The company has stepped up these investments by 130.55 per cent to Rs 1,801.40 crore (Rs 18.01 billion) in 2003-04, accounting for 73.02 per cent of its total investment of Rs 2,466.03 crore (Rs 14.66 billion).

Companies that have not invested previously are also giving place to the mutual funds in their investment priorities. Tata Motors, which took the second slot, has parked Rs 1,491 crore (Rs 14.91 billion) in mutual funds schemes.

In the previous year, it invested none in mutual funds. The company, which netted Rs 810.34 crore (Rs 8.10 billion) in 2003-04, invested Rs 1,491 crore (Rs 14.91 billion) in debts funds, monthly-income plans and fixed-maturity plans.

Infosys Technologies, which has Rs 2,683 crore (Rs 26.83 billion) in reserves and surplus, too, parked Rs 929.60 crore (Rs 9.3 billion) in money-market funds compared with none in the preceding fiscal.

The third in the list, Hindustan Lever Ltd, an FMCG major, has parked Rs 1,208 crore (Rs 358 crore) in the fund schemes.

The other big investors in the mutual funds schemes were HCL Technologies (Rs 508.56 crore), Raymond (Rs 425.33 crore), GE Shipping (Rs 397.62 crore) and Motor Industries (Rs 282.36 crore).