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Wednesday, March 25, 2009

India Inc's investment growth soars to 53%

Growth of corporates' investments has surged from 31.79% during 2006-07 to 52.55% during 2007-08. The investment to asset ratio steadily increased from 17.85% during 2005-06 to 18.07% in 2006-07 and further increased to 21.03% during 2007-08. This was revealed at a study on the investment pattern of 1,548 major companies during 2007-08, 2006-07 and 2005-06.

These companies invested Rs 1.79 lakh crore during 2007-08 (Rs 1.17 lakh crore during 2006-07, Rs 0.92 lakh crore during 2005-06) in company equity shares, Rs 0.98 lakh crore in mutual fund schemes (Rs 0.55 lakh crore, Rs 0.38 lakh crore during the three years) and Rs 0.66 lakh crore in debentures and bonds (Rs 0.60 lakh crore, Rs 0.50 lakh crore) respectively. The share of equity in total investment decreased from 48.09% during 2005-06 to 46.30% during 2006-07 and marginally increased thereafter to 46.58% during 2007-08. And the share of debentures and bonds in total investment decreased steadily from 26.37% to 17.16% during the same period.

But the share of mutual fund units in total investments increased from 20.22% during 2005-06 to 21.84% during 2006-07 and further increased to 25.44% during 2007-08. This indicates that the corporates are taking more interest in investing in mutual fund units.

R Swaminathan, associate vice-president, IDBI Capital, said, “It is the efficient way of functioning in treasury to utilise the investment opportunity available in mutual funds due to its inherent advantages like liquidity, reasonable returns, tax efficiency, short term nature, among others, that has guided the corporates to mutual funds.”

“The investment from corporates mainly goes towards debt funds like liquid, short term debt and floating funds. The liquid schemes are the best alternate for bank deposits in the short term. Even a day or two’s investments can be done,” he added.

The significant increase in investment in mutual fund units was seen in the case of Larsen &Toubro, Hindalco Industries, Hero Honda Motor, Maruti Suzuki, Hind Zinc, Tata Motor and Sterlite Industries.

The investment in mutual fund units of Larsen & Toubro increased by 465.66% to Rs 4,075 crore during 2007-08 from the level of Rs 720 crore during 2005-06.

There was more than a 100% growth in total investment by 374 companies during 2007-08. Some of them are Suzlon Energy, Gitanjali Gems, GMR Infrastructure, Unitech and Punj Lloyd.

One hundred thirty four companies recorded an increase of more than Rs 100 crore in investments during 2007-08. Significant among them are M&M, Biocon, Birla Corporation, Shree Cement and Godrej Industries.

The top five among the 1,548 major companies in terms of investments during 2007-08 are Reliance Industries, Indian Oil, NTPC, Hindalco and Reliance Communications. Among these, highest increase in investment was registered in the case of Reliance Communication (154.7%).

Out of 1,548 companies, 857 showed a rise in the investment-asset ratio during 2007-08. Significant among them are Dish TV, Monsanto India, Bharti Airtel, Sterlite Industries, Suzlon Energy, Reliance Infrastructure, CMC and Biocon.

A reverse trend can be seen in the case of Tata Steel, Thermax, Ambuja Cement, Ceat, Gammon India and Grasim Industries.

source: The Financial Express
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