India Inc Cash Surplus: Strategy or Lack of Opportunity?

            
 
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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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Case Details:

Price:

Case Code : FINC072 For delivery in electronic format: Rs. 200;
For delivery through courier (within India): Rs. 200 + Rs. 25 for Shipping & Handling Charges

Themes

About Dividend and Share Repurchase effect to investors
Case Length : 11 Pages
Period : 2007-2011
Pub. Date : 2011
Teaching Note : Not Available
Organization : Bajaj Auto Limited, Hindustan Unilever Limited, ITC Limited, Infosys Ltd., Reliance Industries Ltd., Tata Motors Ltd. and Wipro Ltd.
Industry : Various
Countries : India

Abstract:

The case brings to the fore that some Indian companies have accumulated huge cash balances on their books in 2011. These huge cash balances could be accumulated for some strategic requirements in the future. The total cash balances accumulated by 100 companies in BSE–500 accounted for 93% of market capitalization of BSE-500 shares.

The companies which held huge cash balances included bigwigs like Tata Motors with Rs. 109479.3 million, Infosys with Rs. 150,900 million, and Reliance Industries with Rs. 301,390.3 million. The cash was invested in short-term instruments, but the companies had a strong reason for keeping such cash pile.

Finance | Case Study in Management, Operations, Strategies, Finance, Case Studies

Issues:

Understand the cash position of the companies, whether the cash position can be considered surplus or optimal.
Determine the different motives for which those companies accumulated a huge cash balance.
Determine whether there could be any adverse possibilities to the management if accumulated cash is more than market capital of the company.
Compute the minimum and maximum level of cash in hand to be maintained by the companies.
Discuss what could happen if the company could not use the cash for the set purpose.

Contents:

  Page No.
Introduction 1
Cash and Excess Cash 1
What is excess cash? 2
Cash for Expansion and beating inflation: Bajaj Auto Limited 2
Cash for uncertainty: Infosys 3
Cash for Buyback: Hindustan Unilever Limited 3
Cash for Bonus and Dividends: ITC and Wipro 4
Surplus Cash for investments: Reliance Industries Limited 4
Right Direction to Surplus Cash: Tata Motors 5
Parking Excess Cash 5
Exhibits 6

Keywords:

Surplus, Bonus, Buyback, Dividends, Uncertainty, Investments, Excess Cash, surplus Cash, Expansion, opportunities to utilize cash, accumulated surplus cash, Parking Excess Cash, Cash Management, Payout Policy, Productivity of Assets, Liquidity

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