To change the world, India Inc must stop hoarding cash and take more risks

What’s more, this tendency to hoard cash isn’t new. According to the analysis, the ratio of cash to total assets for these 285 companies grew from 8.4% in FY19 to a high of 32.1% in the covid year of FY21 (understandably so) before dropping. In FY25 it was 11.8%, still substantially higher than the pre-covid level of 8.4%, logged in FY19.

The bigger they are, the harder they hoard

If we expand the analysis to the 500 companies that form the Nifty 500 Index, the picture becomes even more stark. These 500 companies are (with a few exceptions) arguably India’s largest, most valuable, successful, globally integrated and globally competitive businesses. They are all also highly profitable. And they are all ploughing those profits largely into cash reserves.

For the Nifty 500 companies, cash and cash equivalent reserves hit ₹17.5 trillion in FY25, up 17% year-on-year, easily surpassing the 12% increase in FY24.

What’s more, India’s biggest companies are sitting on the most cash. In FY25, the combined cash and cash equivalent reserves of just five companies – Reliance Industries, Larsen & Toubro, Tata Motors, Infosys, Wipro and Tata Consultancy Services stood at ₹3.38 trillion. Reliance alone accounted for two-thirds of this, with a cash pile of ₹2.25 trillion.

This mountain of cash is due to extraordinary growth in profits as measures to rationalise costs and operations put in place after the pandemic have started to bear fruit. According to NSE’s Corporate Performance Review for FY25, just the top 50 companies, represented by the Nifty 50 Index, recorded profits of ₹8.4 trillion in FY25, marking 5.5% growth over the previous year.

Cash for cash’s sake

But this money is not being used to build capacity, create or grow into new markets, acquire businesses, invest in research & development, or even reward shareholders. It’s simply sitting on companies’ balance sheets.

According to a report by Nuvama Research, India Inc’s capex growth slowed to around 6-8% in FY25 from 20% in FY24. Automobiles and tractors maker Mahindra & Mahindra grew its cash reserves by 66% in FY25 but added only 12% to fixed assets; L&T grew cash reserves by 32% in the same period but added only 0.2% to fixed assets; Infosys added 32% to cash but just 5% to fixed assets; and so on.

Actually, all this should not come as a great surprise. India Inc has historically been risk-averse. Other than IT services firms, Indian companies have largely chosen the relative security of the domestic market over bold international bets. Even IT services has played it safe, having failed to make the shift from offshore services to products.

Back in 2015, Infosys was one of a handful of companies that donated to OpenAI, whose ChatGPT would just a few years later turn the technology world on its head. That was under the leadership of its then CEO Vishal Sikka. But Sikka soon stepped down owing to differences with Infosys’s powerful founders led by NR Narayana Murthy, and that early and prescient bet never paid off.

Instead, Microsoft stepped in with a $1-billion investment in the now for-profit OpenAI. Infosys has been left playing catch-up, partnering with Microsoft to develop AI solutions, as well as the leader in AI hardware, Nvidia.

Risk it for the biscuit

In one of P.G. Wodehouse’s classic novels, his immortal characters – the amiable aristocrat Bertie Wooster and his ‘gentleman’s personal gentleman’ Jeeves – are forced to become bookies for a while. Jeeves is, in particular, extremely successful at this, enticing punters with his pitch: “You can’t accumulate if you don’t speculate!”

Speculation – or risk-taking – is fundamental to business. Risk and reward are intrinsically linked; the greater the risk, the greater the reward. An extreme example of risk-taking was when FedEx promoter Fred Smith faced closure after failing to secure a bank loan. He went to Las Vegas with $5,000 of the company’s remaining cash and won enough by gambling to keep it going. When he died last month, Smith was personally worth more than $6 billion.

But business risk is not like outright gambling. It is the ability to take a calculated risk where others failed to see opportunity. Apple had a successful computer business but bet big on smartphones, and is now one of the world’s most valuable and influential companies. In 2006, when video streaming was in its infancy, Google acquired YouTube for a then-substantial $1.65 billion. In 2024, YouTube alone generated more than $36 billion in revenue for Alphabet.

There are no similar bold bets in India Inc’s history, other than perhaps Tata’s Corus and Jaguar-Land Rover buys in 2007 and 2008. There is no true Indian multinational. There is no Indian company with a genuinely global brand. What they have instead is heaps of cash.