By VISHAL KUMAR PRAJPATI
CASH reserves of India's top five IT service firms crashed to $5.8 billion in 2018-19 fiscal from over $10 billion five years ago.
Cash and cash equivalents (standalone) of five firms including TCS , Infosys, Wipro, HCL Technologies and Tech Mahindra stood at Re.38,808 crore as on March 2019 as against Re.70,539 crore in FY15, translating to de-growth of 45 per cent. In contrast, their consolidated cash balances increased twofold between FY11 and FY15.
It's not that companies didn't stash cash every quarter in last five years. Yet their reserves plunged as firms perhaps under shareholder pressure started utilising unspent cash. While cash reserves of TCS fell 46 per cent , that of Infosys and Wipro reduced by 44 and 34 per cent respectively. HCL and Tech Mahindra are yet publish FY19 cash balance, and their Q3 figures are considered here for FY19 calculations. So, where's all the money going?
Increasingly. IT firms are buying back shares with surplus cash that cannot be deployed elsewhere. Last week Wipro announced a Re.10,500 crore issue, that third offer in four years. Infosys too announced Re.8,200 crore buyback last month, while TCS' offer last year was for an eye-popping Re.16.500 crore.
Buybacks allow companies to repurchase on shared at premium and increases promoters' ownership. Which instills confidence in their growth.But analysts argue that buybacks are being pursued for tex purpose. For instance, shareholders can be rewarded with a dividend, but it attracts 15 per cent if dividend income exceeds Re.10 lakh a year.
Typically, firms having too much cash add additional capacities or acquire business .But in case IT firms, capital expenditure has been dipping for two reasons: One , automation and two subdued manpower addition.
High cash balances and low debt allows companies to chase larger acquisitions,but here too Indian IT firms have been wary of getting into big-ticket deals. For instance, TCS insists it is "acquisition-hungry", but is yet to prove this with actions. One of is largest acquisitions (in absolute terms) dates back to 2013. when is spent Re.533 crore for Alti SA. Last month, Infosys said it will pick up Amro for Re. 989 crore, but the amount is a fraction of his total of total reserves.
CASH reserves of India's top five IT service firms crashed to $5.8 billion in 2018-19 fiscal from over $10 billion five years ago.
Cash and cash equivalents (standalone) of five firms including TCS , Infosys, Wipro, HCL Technologies and Tech Mahindra stood at Re.38,808 crore as on March 2019 as against Re.70,539 crore in FY15, translating to de-growth of 45 per cent. In contrast, their consolidated cash balances increased twofold between FY11 and FY15.
It's not that companies didn't stash cash every quarter in last five years. Yet their reserves plunged as firms perhaps under shareholder pressure started utilising unspent cash. While cash reserves of TCS fell 46 per cent , that of Infosys and Wipro reduced by 44 and 34 per cent respectively. HCL and Tech Mahindra are yet publish FY19 cash balance, and their Q3 figures are considered here for FY19 calculations. So, where's all the money going?
Increasingly. IT firms are buying back shares with surplus cash that cannot be deployed elsewhere. Last week Wipro announced a Re.10,500 crore issue, that third offer in four years. Infosys too announced Re.8,200 crore buyback last month, while TCS' offer last year was for an eye-popping Re.16.500 crore.
Buybacks allow companies to repurchase on shared at premium and increases promoters' ownership. Which instills confidence in their growth.But analysts argue that buybacks are being pursued for tex purpose. For instance, shareholders can be rewarded with a dividend, but it attracts 15 per cent if dividend income exceeds Re.10 lakh a year.
Typically, firms having too much cash add additional capacities or acquire business .But in case IT firms, capital expenditure has been dipping for two reasons: One , automation and two subdued manpower addition.
High cash balances and low debt allows companies to chase larger acquisitions,but here too Indian IT firms have been wary of getting into big-ticket deals. For instance, TCS insists it is "acquisition-hungry", but is yet to prove this with actions. One of is largest acquisitions (in absolute terms) dates back to 2013. when is spent Re.533 crore for Alti SA. Last month, Infosys said it will pick up Amro for Re. 989 crore, but the amount is a fraction of his total of total reserves.
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