IT majors dominate growing cash mountain
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IT majors dominate growing cash mountain

By SiliconIndia   |   Friday, 27 April 2007, 07:00 Hrs
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Mumbai: In the present high boom in the economy and growing outsourcing opportunities, the top five Indian information technology players – Tata Consultancy Services, Infosys Technologies, Wipro, Satyam Computer Services and HCL Technologies – have piled up net cash in excess of $4761.90 million.

The net cash increased by 31 per cent to $5035.33 million in 2006-07 from $3845.56 million in the previous year. According to the analysts, the estimated figure increased by 60 per cent in the current financial year.

The total turnover of the five companies for the 2006-07 financial year stands at $13665.95 million, which has an increase of 40 per cent over last fiscal’s number of $9769.76 million.

As per the analyst’s assumption, these companies total income should surpass $20 billion by 2009, if they continue growing at this pace.

The aggregate net profit of these IT firms increased by around 56 per cent to touch $3127.38 in the 2007 financial year. These five firms are expected to have $8034.04 million as net cash representing a 59.5 per cent increase over the previous year’s figure.

Almost all of these companies said the best way to utilize their cash mountains was to turn them over to shareholders. As a part of paying dividend to shareholders in 2006-07 these five companies paid $ 807.5 million as against $795.47 million in the previous year (which includes a special dividend by Infosys).

They also have plans to utilize the cash for capital expenditure requirements (which is not much since these are service firms), acquisitions and hedging against adversities. “As with any IT firm, we use it (cash) to pay dividend, for capital expenditure (capex) and expansion, to fund existing business and develop sale and marketing presence, for potential acquisitions and to hedge against adversities like a 9/11 kind of situation,” says an HCL Technologies spokesperson.

According to TCS spokesperson, the company uses the cash for capex, rewarding shareholders with dividends and funding inorganic growth. On the other hand, Wipro usually utilizes the cash to acquire companies and has plans to buy companies (each deal worth $100 million) in pharmaceutical and aviation sectors.

Infosys Technologies is sitting on the largest pile of cash ($1465.95 million). “The robust financial model followed at Infosys allows the company to balance profitability as well as invest in growth and maintain the liquidity position,” says V Balakrishnan, CFO, Infosys Technologies.

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