As many as 303 companies turned debt-free in FY25, doubling the cash on their books, in a sign that India Inc remains reluctant to make substantial new investments.
The cash on the books of these companies touched Rs 50,463 crore, up from Rs 21,478 crore in FY24. Their debt, at an aggregate level, stood at Rs 28,007 crore in FY24.
The data has been collated from a universe of nearly 3,500 listed companies tracked by Capitaline. While the number of debt-companies accounts for just 9% of the sample, the trend of hoarding cash hardly augurs well for these companies or India Inc in general, experts said.
G Chokkalingam, founder at Mumbai-based Equinomics Research, observed that post Covid-19, there has been a growing trend to increase cash reserves as a buffer against future shocks. “At a broader level, the world is rapidly changing with geopolitical tensions growing, supply-chain disruptions increasing and trade and tariff wars on the rise,” he said.
Deven Choksey, managing director, DRChoksey FinServ, believes companies are avoiding debt, partly due to the stringent conditions attached by lenders. “Firms instead are turning to equity as a fund-raising option. The buoyancy in stock markets and investor appetite for quality paper have helped companies tap the equity route,” Choksey said.
Chokkalingam said it is becoming a standard practice for companies to use money raised via equity offers to fund capex or repay loans. “The propensity to use free cash flows to fund investment such as acquisitions is also growing. This is happening as a result of increased focus on operational efficiency, working capital management and prudent capital allocation strategies,” he said.
Some experts said that the surge in cash holdings also reflects a changing approach to capital expenditure. Firms today favour an asset-light strategy, driven by changing consumer habits.
The Reserve Bank of India’s Financial Stability Report released last month notes that corporate debt levels in FY25 grew by just 2.9%, the slowest pace in five years. This is even as the RBI’s monetary policy committee has cut the repo rate by 50 basis points to 5.5% last month, marking the third cut this calendar year and a total 100 bps reduction in 2025, in a bid to improve credit growth.
Subodh Rai, MD, Crisil Ratings, noted that India Inc’s low capex intensity and balance sheet strength actually offer ample cushion against global shocks in the future.