India Inc sits on ₹5 trillion cash pile as firms hold back on capex amid uncertainty

A Mint analysis of cash holdings of 285 BSE-listed firms, excluding banking, financial services and insurance companies, showed a 12% year-on-year rise to ₹5.09 trillion in FY25. 

Yet, new project announcements fell 5% in the same period, following a 3% contraction in FY24, according to the Centre for Monitoring Indian Economy’s (CMIE) project-tracking database.

Companies are now sitting on cash and cash equivalents amounting to nearly 12% of their total assets. The rising number of firms with high cash ratios also points to subdued confidence in future business prospects. Between FY24 and FY25, more companies positioned themselves defensively, holding 25-50% of their assets in highly liquid form, the analysis showed.

With no broad-based demand revival since the pandemic, there’s little incentive to reinvest profits. Rather, in the absence of sustained revenue growth, many firms have relied on cost optimization and price hikes to maintain profitability.

Still, flush with cash, many companies rewarded shareholders handsomely. A separate Mint analysis of 496 BSE 500 companies showed dividend payouts rose 11% on year in FY25 to ₹4.9 trillion—the highest in at least a decade, outpacing net profit growth of 9.5%. That suggests India Inc currently prefers sharing profits with investors over committing to long-term expansion.

Recovery ahead?

The big question now is when that investment impulse might return.

Many experts believe a pickup in investments may hinge on global clarity—particularly a long-awaited US-India trade deal. President Donald Trump’s reciprocal tariff pause ends on 9 July, and firms appear to be holding off until there’s more certainty on that front.

Asit Bhandarkar, senior equity fund manager at JM Financial Asset Management, notes that a lot of projects are in “blue-print" mode and would be led by both organic and inorganic expansion plans. "The rising number of performing credit deals also indicate that money is being raised to improve existing capacities as well," he said.

On a more optimistic note, Pankaj Pandey, head of retail research at ICICI Securities, expects a sharper rebound in corporate investments in FY26, especially after private capex outpaced government spending last year. He expects energy, utilities, metals, automobile and industrial goods sectors to lead the capex cycle this year.

Adding to that, Raghav Narsalay, research lead and partner at PwC, pointed out that many firms now aspire to become global value chain leaders. “So everyone wants to deploy cash wisely, even though money is getting cheaper to borrow."

Alternate avenues

Beyond dividends, some of India Inc.’s war chest may also be channelled into product innovation and service enhancements.

In order to drive topline growth from here on they are gearing up to expand their customer outreach, said Narsalay. “Companies are now looking to innovate products, reinvent their business models and overall offer better value propositions to lure back customers. They are more willing to experiment with technology rather than buy lands or machinery immediately," he added.

Meanwhile, with fortified balance sheets and relatively low leverage, firms have ample room to borrow for acquisitions. Total debt level rose just 5% in FY25, following a slight contraction in FY24, the analysis showed.

“Amid stable raw material prices, benign interest rates and relatively stable balance sheets, they can also borrow for inorganic expansions," noted Pandey from ICICI Securities.

Strong cash flows and high profitability, coupled with cooling valuations and improved liquidity, have triggered a wave of consolidation in several industries. Cement, cables, paints and healthcare have seen a particular pickup in acquisition activity, said JM Financial’s Bhandarkar.