The cash reserves of BSE 500 companies (excluding the banking, financial services, insurance (BFSI), and oil & gas sectors) climbed to ₹7.68 lakh crore as of September 30, 2024, according to ACE Equities’ data. This marks a 51% jump compared to ₹5.06 lakh crore at the end of FY20, just before the COVID-19 pandemic.
Key Drivers Behind The Growth
Analysts attribute this impressive growth to several factors:
- Stock Market Momentum: A buoyant stock market supported equity fundraising through Initial Public Offerings (IPOs) and Qualified Institutional Placements (QIPs).
- Premiumisation and Digitisation: Shifts toward premium products and increased digitisation boosted profit margins.
- Industry Consolidation: Consolidation in various sectors reduced competition and improved financial stability.
- Operational Prudence: Companies adopted stricter cost control measures.
Post-Pandemic Strategy Shift
Post-pandemic, Indian corporates prioritized healthier balance sheets. The demand boom following COVID-19 further supported this focus on reducing debt.
Also Read: Securitisation Volumes Hit ₹68,000 Crore In Q3 FY25, Driven by Banks And NBFCs
“The pandemic taught companies the importance of maintaining higher liquidity for unforeseen challenges,” said Bhavesh Shah, Managing Director and Head of Investment Banking at Equirus.
Role Of Stock Market In Deleveraging
Shah also noted that a strong stock market played a significant role in helping companies reduce debt. “The IPO and QIP rallies allowed companies to deleverage, as debt repayment became a key focus for IPO fund utilization. Markets reward companies with debt-free operations,” he added.
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