Nearly 24% BSE cos have zero debt

Written by Pradip Kumar Dey | Mumbai | Updated: May 5 2011, 07:50am hrs
With borrowing costs picking up, Indian companies are gradually reducing their debt on their books to minimise their interest expenses. An FE study of the 3,500 publicly traded companies on the Bombay Stock Exchange shows that one out of four companies have zero debt.

The study also shows that 831 companies or 23.7% of the BSE-listed companies had zero debt during the period 2009-10. NBFCs constituted 41% of the total zero debt companies during 2009-10. Zero debt listed companies are those listed companies which has no debt in their balance sheet. The cumulative sales of 831 zero debt companies was R1.46 lakh crore in 2009-10 against the cumulative sales of 908 zero debt companies was R1.09 lakh crore in 2008-09.The sales of 831 companies constituted 4.5% of total sales of 3500 companies during 2009-10. The highest and lowest number of zero debt companies were witnessed in the case of NBFCs and cement respectively during 2009-10.

During 2009-10, the top five zero debt companies in terms of sales were Infosys Technologies, Hind Unilever, PTC India, Nestle India and NMDC. Hind Unilever turned out to be zero debt company in the year 2009-10 from a debt of R422 crore during 2008-09. Among these five zero debt companies highest increase (47.1%) in net worth was seen in the case of Nestle India during 2009-10.

In 2008-09 the top five zero debt companies in terms of sales were Infosys Technologies, NMDC, PTC India, National Aluminium and MTNL. Three companies namely Infosys Technologies, NMDC and PTC India are common in the list of top five companies during both the years list of top five. The average P/E ratio of sample companies decreased from 53.57 during 2008-09 to 51.62 during 2009-10.

Interestingly, more multinational companies are turning to zero debt. There were 53 MNCs with zero debt in 2009-10 as against 44 during 2008-09. They normally use funds out of internal accruals for their expansion in India and do not require large amount of cash for overseas acquisition.

Some of the MNCs who figure in the list of zero debt companies during 2009-10 include ABB, Castrol, GlaxoSmith CHL, Aventis Pharma and Hind Unilever.

Out of 831 zero debt companies during 2009-10, 123 companies entered first time in zero debt list. They include Hemadri Cements, Chemfab Alkalis, CMC, MRO-TEK, Infotech Enterprises, BSEL Infra, Oberoi Realty and Praj Industries. Among the industries studied, significant decline in the number of zero debt companies during 2009-10 was witnessed in the case of IT, entertainment, NBFC, pharmaceuticals, solvent extraction and trading. The number of zero debt companies in NBFCs decreased from 423 during 2008-09 to 343 during 2009-10.The average P/E ratio of NBFCs decreased from 46.45 during 2008-09 to 42.91 during 2009-10.

An opposite trend was seen in the case of automobiles, chemicals others, construction, jems & jewellery, diversified, electric equipment, electronics, engineering, food & products, hotels, personal care, tea, telecommunications, textiles and vanaspati. The number of zero debt textile companies increased from 28 during 2008-09 to 33 during 2009-10. The average P/E ratio of textile companies increased from 53.44 during 2008-09 to 65.85 during 2009-10.