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.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• 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.

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