IiAS study finds 45 of BSE500 companies sitting on Rs 68,900 crore excess cash

A close look at the S&P BSE 500 companies has found that at least 45 of them have the potential to generate an additional wealth of Rs 68,900 crore for their shareholders, according to a study by the Institutional Investor Advisory Services India Limited (IiAS).

This evaluation takes into consideration the financial statements of FY22 and incorporates announced acquisitions and capital expenditure (capex) after the balance sheet date.

“While companies have been returning more cash to shareholders (through dividends and buybacks) in FY22, cash balances continue to build up for corporate India. Based on the FY22 financials, adjusted for announced acquisitions and capex in FY23, 45 of the S&P BSE 500 companies can return more than Rs 689 billion to their shareholders, which is almost 41 percent of their on-balance-sheet cash for the fiscal year-end,” IiAS said in a note.

IiAS provides independent opinion, research and data on corporate governance and ESG and issues voting recommendations on shareholder meetings for about 1,000 companies.

Out of the total excess cash of Rs 68,900 crore, it was observed that five companies – TCS, Siemens, ITC, Hero MotoCorp, and Sun TV – account for 56 percent of this amount. Collectively, these companies hold an excess cash balance of Rs 37,800 crore, representing approximately 47 percent of their total cash as of March 31, 2022.

Providing further insights, TCS has an excess cash of Rs 66 per share, while Hero MotoCorp, despite its average performance, has an excess cash of Rs 3,840 crore, equivalent to Rs 192.2 per share.

Among the identified firms, the excess cash in four companies can lead to an incremental dividend yield exceeding 10 percent, with two of them being public sector enterprises (PSUs). If the excess cash of Ircon International is distributed, it could result in an incremental dividend yield of around 46 percent. Similarly, for RITES, the excess cash would contribute to an additional dividend yield of approximately 14 percent.

In the case of Sun TV, the excess cash of Rs 2,490 crore accounts for roughly 16 percent of the dividend yield. For VSTIND, the excess cash of Rs 520 crore would correspond to an approximately 11 percent dividend yield.

There are five companies where the excess cash amounts to over Rs 500 per share in terms of incremental dividend. These companies are Bosch Ltd, Honeywell Automation India Ltd, Abbott India, 3M India, and Lakshmi Machine Works Ltd. Notably, Honeywell Automation has an excess cash value exceeding Rs 1,600 per share, resulting in an incremental dividend yield of 5 percent.

Out of the 45 companies, 28 have the potential to pay incremental dividends, accounting for 50 percent of their cash balances. Moreover, among these 28 companies, six have excess cash that represents over 75 percent of their on-balance-sheet cash as of March 31, 2022.