India Inc raids the piggy bank, even as capex plans stay muted
After years of aggressive hoarding, Indian corporations are finally dipping into their cash reserves to fund strategic acquisitions and record shareholder payouts. However, with capacity utilization remaining stubbornly low, the long-awaited private investment cycle continues to take a backseat.
Following years of aggressive hoarding, Indian corporations are starting to dip into their cash reserves to fund dividend payouts and acquisitions, but not capital expenditure (capex).
According to a Mint analysis of data from the Centre for Monitoring Indian Economy (CMIE), the pace of cash accumulation hit an eight-year low by September 2025.
The analysis of CMIE data for a common sample of nearly 2,000 listed firms, excluding banking, financial services and insurance (BFSI) companies, showed that cash and bank balances rose just 1% year-on-year to about ₹5.4 trillion by September. The pace is a far cry from the pandemic period, when heightened uncertainty pushed median cash balances up by nearly 15% annually between September 2020 and September 2024.
Companies are now sitting on a cash pile equivalent to nearly 5% of their total assets, up from 3.5% in September 2017 and 4% in September 2020, the analysis showed. However, these levels are still below those of their global peers. According to an August 2025 Morgan Stanley report, Indian corporate cash holdings trailed both the US and global medians, which stood at 9% and 11% of total assets, respectively, in 2024.
“India Inc’s cash balances may look high in absolute terms, but they are far lower than cash buffers typically held by American and European companies," said Ajitabh Bharti, executive director and co-founder of CapitalXB, a Reserve Bank of India-registered non-banking financial company focused on financing small and medium enterprises and cross-border supply chains.
Where did the money flow?
However, the slower pace of cash accumulation reflects a shift in corporate strategy, experts said, with firms prioritising higher shareholder payouts and selective inorganic growth amid abundant liquidity.
Bharti said the moderation in cash build-up this year was largely on account of companies setting aside funds for inorganic expansion and hefty dividend payouts in the coming year. Dividend payouts by firms hit a decade-high ₹3.5 trillion in FY25, rising 14% year-on-year, a separate analysis of Capitaline data showed. While FY24 saw a brief contraction, the broader trend remains strong. In the three years prior, dividends grew at roughly 25%.
While Bharti expects dividend payouts in FY26 to maintain FY25’s growth trajectory, he sees corporate cash being deployed largely for strategic buyouts and mergers, rather than creating new capacity. “While pharma has already seen sharp inorganic expansion this year, export-linked and consumer sectors are also likely to join the ranks next year," he said.
According to PwC data, 713 mergers and acquisitions were completed in the first half of 2025, up 23% from the same period a year earlier. This followed a strong rebound in deal activity from late 2024, after two years of subdued volumes. This reflects a shift towards targeted, opportunity-driven deployment of surplus cash, said experts.
Bharti added that companies were increasingly eyeing mid-sized overseas acquisitions to enhance technological capabilities and extract synergies with existing manpower.
Missing animal spirits
Interestingly, India Inc’s appetite for acquisitions is growing even as corporations keep their broader investment spigots tight. New project announcements fell 12% year-on-year to ₹8.6 trillion in the September quarter of FY26 after doubling in the June quarter, CMIE data showed.
Capex announcements are often lumpy and tied to specific projects, sectors or policy triggers. But the broader reluctance to pursue fresh capacity creation stems from India Inc’s chronically low capacity utilization levels, experts noted.
Over the past two decades, average capacity utilization in Indian manufacturing has hovered around 73%. This suggests capacity utilization has consistently fallen short of levels needed to drive a broad-based expansion cycle, resulting in more corporate cash hoarding.
“Persistently low capacity utilization is a central reason why elevated corporate cash balances have not translated into a broad-based private capex cycle," said Sonam Srivastava, founder and fund manager at Wright Research PMS. Even during periods of strong growth, incremental demand had often been absorbed through efficiency gains rather than fresh investment, she added.
Apurva Sheth, head of market perspectives and research at SAMCO Securities, noted that technology-led efficiency gains, changing consumption patterns and the rise of asset-light models were further reducing the need for capital-intensive expansion. “This naturally lowers the appetite for large-scale capex even when financing conditions are supportive," he added.
A meaningful capex upcycle would require utilization levels to persist near 80%, pointing to broad-based demand strength, said Bharat Arora, lead of strategy at Ambit Capital. "In the absence of clearer demand cues and a supportive global cycle, corporate cash levels are likely to remain elevated in FY26," he said.
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