India Inc Cash Reserves Grow Twice as Fast as Debt in FY25 Amid Economic Uncertainty

According to a news report, India Inc is shifting towards stronger financial stability by doubling down on cash retention and reducing reliance on debt. This marked trend stems from uncertainty in global economics, leading corporations to prefer leaner, healthier balance sheets over aggressive borrowing.

Cash Reserves Outpace Debt Growth Across India Inc

Between FY20 and FY25, 343 non-financial BSE500 companies saw their cash balances grow at a compound annual growth rate of 10.43%, nearly double the 5.57% CAGR of their total debt. As of March 31, 2025, these companies collectively held ₹5.1 trillion in cash, up from ₹3.1 trillion in FY20. Debt during the same period rose from ₹26.4 trillion to ₹34.64 trillion, indicating a deliberate shift in corporate strategy towards liquidity preservation and reduced borrowing.

More Firms Achieve Zero or Positive Net Debt

Since FY20, the number of companies with zero or positive net debt, that is, where cash equals or exceeds outstanding debt, has surged. Nearly 200 of the 343 firms analysed experienced faster growth in cash than in debt. Around 130 companies emerged net debt-free by FY25, showcasing enhanced focus on operational efficiency, working capital management and capital utilisation strategies.

Read More: India May Use Mexico FTA to Bypass US Tariffs on Steel and Auto Exports!

Shifting Capex Strategy and Investor Appeal

The surge in cash holdings also reflects a changing approach to capital expenditure. Many companies are now favouring asset-light and digital strategies over capital-intensive projects. Changing consumer habits from physical goods to service-based consumption further supports this lower capex intensity. 

Equity Markets and Liquidity Driving Balance Sheet Strength

Favourable equity markets have enabled companies to raise funds via IPOs and QIPs, often to repay debt or fund selective expansion. Equity has become a preferred funding source amidst higher interest rate environments. With interest rates expected to ease further, firms with healthy cash reserves may be better positioned for upcoming investments.

Conclusion

India Inc's preference for boosting cash reserves over increasing debt signals a structural change in financial management. Enhanced liquidity, focus on efficient capital allocation, and supportive equity markets are driving this shift, positioning companies for more resilient and sustainable growth in the coming years.

Disclaimer: This blog has been written exclusively for educational purposes. The securities or companies mentioned are only examples and not recommendations. This does not constitute a personal recommendation or investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in securities are subject to market risks. Read all related documents carefully before investing.