India Inc’s cash kings

Holding high cash by companies is usually frowned upon by shareholders, who’d rather any surplus be paid out as dividends, if not deployed in growing the business. That’s true in normal times. COVID-19 and lockdowns are unusual once-in-a-lifetime phenomena. And in these unusual times, cash is coveted. In fact, the resilience of a business and its future prospects weigh heavily on how long a company can hold out without significant cash inflows.

Using this premise, we ran the numbers to dig up companies that could cover their core operational expenses and their finance costs for a significant length of time. We started out with some pessimism but were surprised by the final numbers. There were 11 non-financial companies in the BSE-500 that could meet such expenses for a good 12 months or more with their holdings of cash and liquid investments at the end of fiscal 2020.

A few further filters—such as a healthy return-on-equity, free-cash-flow generation, growth in sales and profits historically and low leverage—were applied to this set to come up with six companies that seem to have the resources to see through a long haul cash inflow hiatus. These six companies, in alphabetical order, are footwear king, Bata; food & snacking major, Britannia; oral care market leader, Colgate Palmolive; port operator, Gujarat Pipavav; cement major, Shree Cement.