India Inc is hard pressed for cash; collective cash flows from operations for a clutch of 56 top firms grew by just 3% last fiscal, the slowest growth in three years, reports Devangi Gandhi in Mumbai. After two years of fairly robust increases of 30% on an average, cash flows of these companies were crimped in the financial year 2014-15 in a sluggish economic environment.
Not suprisingly, the profit before tax for the pack dropped 10% in the last financial year.
While in some instances, like with Cairn India, this was due to the sharp fall in the price of crude oil, in other cases — Bajaj Auto and Crompton Greaves — relatively weak demand impacted the business resulting in a fall of 13% year-on-year in the profit before tax. Higher inventories and provisions for advances and liabilities led to a fall of 39% in operating cash flows of Bajaj Auto while Crompton Greaves reported a negative cash flow of Rs 680 crore, the first time in a decade as trade receivables for its standalone operations jumped more than three times to Rs 1,080 crore.
The outflow was higher due to advances towards loss-making overseas subsidiaries.
Reliance Industries reported a 20% decline in operating cash outflow on account of lower trade payables although the PBT was higher. Similar declines in trade payables – amounts billed to a company by suppliers for goods or serrvices provided on credit – and a higher proportion of PBT paid as net taxes also weighed on the operating cash flows of consumer companies HUL and Asian Paints.
Even as IT companies including TCS, tech Mahindra and Mindtree led the overall growth in the operating cash flows with 30%-86% yoy jump in FY15, realty companies like Oberoi realty and Sobha both reported negative cash flows despite reporting amarginal growth in profits (PBT). In the case of Oberoi realty, a more than four-old jump in inventories to Rs 1,832 crore along with lower dividend income and profit on sale of investments resulted in a negative cash flow of Rs 971 crore. Sobha’s FY15 cash flows, meanwhile, were adversely impacted by loans and advances of the order of Rs 224 crore.