Top Five Cash-Rich Companies

They say ‘cash is king’ – a very relevant observation indeed! And at a time of high interest rates, it is the cash holding which makes a huge difference, not just for individuals but for companies too. Cash becomes the lifeline of an organisation which can be used to run its normal day-to-day operations. Over the years we have seen how cash-starved companies find it difficult to run their business. There also have been cases where companies have gone bankrupt because of no cash reserves. 

Cash-rich companies have an edge on others as they can use this for several purposes to spur business growth, resulting in increasing the shareholder’s value. They can use the cash to reduce their debt (Wockhardt), for capex plans (Coal India, Reliance), for acquiring companies (Infosys), for new projects (NTPC), etc. During the recession when most companies find it difficult to sustain themselves, cash-rich companies can run through such periods very easily. Besides, at such times they also find acquisition opportunities as many companies are available at a discount due to the low business sentiment. 

As for the investors, companies with high cash make for good investment opportunities given the fact that the business of the company is very strong. Next time when you invest, pay attention to the cash position of the company. Here are the top five companies having large cash piles. 

Coal India

Coal India is the largest coal producing company in the world. The company, through its various subsidiaries, meets more than 80 per cent of the coal demand in the country. Coal being a much required commodity in the country, it gives Coal India’s business a monopolistic status. It also implies that the company has the largest cash pile-up. Coal India, as on March 31, 2012, held the topmost position among the cash-rich Indian companies. The company is expected to use this cash for its capex plans as well as to improve the coal logistics’ infrastructure in north India. Being a PSU company, it also pays good dividends. 

Reliance Industries

Reliance Industries, a petroleum giant, is the largest company in the country. It contributes around 3 per cent of India’s GDP which itself speaks of the size of the company. Its businesses consist of sectors like oil & gas, petroleum refining & marketing, petrochemicals, textiles, retail and infotel. Reliance Industries (RIL) is India’s largest private sector company in terms of sales. The company operates mainly in three business segments i.e. petrochemicals, refining and oil & gas. As on March 31, 2012, RIL had a cash reserve of Rs 40,731 crore which makes it the second-largest cash-rich company after Coal India. The company is expected to use this cash for its huge capex plans. 

ONGC

Oil & Natural Gas Corporation (ONGC) is the largest company in India in terms of net profit.  As on March 31, 2012, on a consolidated basis the company had Rs 27,871.64 crore in cash. It is the third-largest company with cash balance. It is also one of the five companies which have a Maharatna status. ONGC represents nearly 3/4^th of the total crude production and 81 per cent of gas production in India. There are a few other feathers in its cap too. According to Platts’ Top 250 Global Energy Ranking, ONGC is the foremost exploration & production company in the world. The company has discovered six of the seven producing basins in India and added 6.4 billion tonnes of oil and gas reserves. Besides, ONGC also has overseas energy assets. 

Infosys

One of the three largest Indian IT companies, Infosys has been talked about lately because of its huge cash pile and its inaction on the utilisation of these reserves. As of FY12, the IT major was sitting on a cash pile of Rs 20,591 crore which translates to as much as USD 4 billion. The long awaited acquisition happened just this week when Infosys bought over Swiss-based consulting firm Lodestone for CHF 330 million or Rs 1,927.73 crore. Though this acquisition is strategically beneficial for Infosys with a view to strengthen its consulting business, there’s not much of a difference that has been made to the cash pile. The company now plans to return this money to its shareholders. 

NTPC

State-owned National Thermal Power Corporation (NTPC) is the largest power generating company in the country. The company is operating 39,174 MW of power generation capacity which makes it the biggest power producer of its kind. As a dominant player, it held cash of Rs 18,091 crore as on March 31, 2012. The company is developing several new thermal power projects in the country that will increase its generating capacity multifold in the next 15-20 years.