Why Infosys needs to reward its shareholders

With corporate profits slumping, returns on stocks have fallen sharpy, and this is affecting investor sentiment across the board. A lot of investors are now looking at questioning the amount of cash companies are sitting on and what they plan on doing with it. For example, analysts are making a case for Infosys as they want the company to return some of the Rs 21,000 crore cash the company is sitting on.

A quick query found that top 14 listed companies had a total net cash (net cash=cash-total debt) of Rs 1.43 lakh crore.

“A sizeable cash balance, an operating engine churning consistent, strong free cash and an aversion to Return-on-Equity-dilutive large acquisitions and large deals to present a strong case for Infosys to pursue a consistent share buyback programme” Kawalijeet Saluja,Rohit Chordia and Shyam M, analysts at Kotak, were quoted as saying in the _Economic Time_s.

In fact, many other foreign firms have also expressed their concerns about the cash Infosys is sitting on. Barclays Capitals has flagged the company for its excess cash and suggested that the company take the dividend route to disburse cash back to the shareholders.

While Infosys ranks as the top company in India in terms of net cash holding, there are approximately 14 companies that are sitting on cash excess of more than Rs 2,000 crore.

Interestingly, Reliance Industries, the largest listed corporate in the country, does not feature in the listas it has a total debt of Rs 82,635crore and cash of Rs 40,731 crore. (Investments were excluded from this query).

Another interesting fact is that five of the 14 companies are government owned. Coal India is the richest company in India sitting on cash of Rs 54,222 crore. NMDC ranks third and close to Infosys with a cash position of Rs 20,241 crore.