There has been a steady decrease in the cash ratio of public sector companies in the last three financial years. The cash ratio for a sample of 55 public sector undertakings (central & state) decreased steadily from 58.43% (or 0.58:1) during ?07-08 to 56.78% in the following year (?08-09) and then to 53.76% during ?09-10.
Cash ratio?cash & bank balances divided by current liabilities & provisions?is an indicator of the extent to which a company can pay its current liabilities with cash in hand, without relying on the sale of inventory and receipt of accounts receivables.
The decline in cash ratio suggests that each year public sector enterprises are having less of the most liquid asset, cash, to meet their current liabilities. On the brighter side, it must be noted that a ratio above 0.5:1 is considered healthy and good enough to get ample credit.
A comparative study has been made for 55 PSUs excluding banks and NBFCs from ?07-08 to ?09-10. The aggregated cash & bank balances of these companies increased by 13.1% to Rs 1.51 lakh crore during ?09-10 from Rs 1.33 lakh crore (14% growth) during ?08-09 and Rs 1.17 lakh crore during ?07-08.
A steady increase in cash & bank balances was seen in the case of SAIL, MRPL, Oil India, PTC India, NMDC, MTNL, SJVN, MOIL and Coal India. The cash & bank balances of SAIL steadily increased by 32.7% to Rs 18,265 crore during ?08-09 from the level of Rs 13,759 crore during ?07-08 and increased further by 22.8% to Rs 22,436 crore during ?09-10.
The current liabilities & provisions of these PSUs increased by 19.5% to Rs 2.81 lakh crore during ?09-10, from Rs 2.35 lakh crore?a growth of 17.3%?during ?08-09 and Rs 2.00 lakh crore during ?07-08.
A steady increase in current liabilities & provisions was seen in the case of MMTC, SAIL, Bhel, GAIL(I), Oil India, Power Grid Corpn., NMDC and Bharat Electronics. The current liabilities and provisions of MMTC increased from Rs 4,819 crore during ?07-08 to Rs 5,387 crore during the year ?09-10.
However, the ratio of cash & bank balances to current liabilities & provisions has decreased during the study period.
The top five PSUs according to cash ratio during the year ?09-10 were NMDC, MOIL, Container Corporation, Oil India and PTC India.
A steady increase in cash ratio was witnessed in the case of ten PSUs, including Coal India, SAIL, RCF and SJVN. The cash ratio of Coal India steadily increased from 81.48% during ?07-08 to 100.10% during ?08-09 and further to 131.94% during ?09-10.
A downward trend in the cash ratio was seen in the case of 21 PSUs, including Bhel, BPCL, NTPC, MMTC, GAIL(I), Nalco, Neyveli Lignite, Engineers India and Dredging Corporation. The cash ratio of Bhel decreased from 41.79% during ?07-08 to 36.34% during ?08-09 and further to 30.12% during ?09-10.
In the sector-wise analysis, a significant decline in the cash ratio in the last three years was seen with automobiles, aluminium, chemicals, electric equipment, gas distribution, pharmaceuticals and shipping. The cash ratio of automobile companies decreased from 14.73% during ?07-08 to 8.24% during ?09-10.
An upward trend in the cash ratio was seen in the case of diversified, metal, mining & minerals, trading, steel and transport. The highest and lowest cash ratio was witnessed in ?09-10 in the case of metal, mining & minerals and refineries, respectively.