ZERO-DEBT CLUB GETS STRONGER

Amit Jain
The Economic Times (Delhi edition)

India Inc’s niche club of zero-debt firms swelled by 20% last financial year. At a time when the corporate sector is facing severe liquidity crunch, those with zero debt on their books are at an advantage as they are largely insulated from the spike in interest rates. An ETIG study of all listed companies shows that there were 66 such firms during FY08 out of which one third were Indian arms of listed multinational companies.

The study focused on listed companies having a minimum of Rs 100 crore of annual sales to focus on firms with a reasonable size. As against 66 such companies during FY08, there were 55 zero-debt firms in financial year 2007. The list of zero-debt companies last financial year is dominated by MNCs who often choose to use funds out of internal accruals for expansion in India. Further, Indian arms of multinational companies restrict their business to India and hence do not require large amount of cash for overseas acquisition, which has become one of the key capex areas for many Indian firms.

Some of the MNCs who figure in the list include GlaxoSmithKline Consumer, Aventis Pharma, Monsanto, BASF, Goodyear India and Gillette India. Incidentally, many of these firms were also part of the list of zero-debt firms at the end of previous financial year. Those firms, which entered the list last year, include Praj Industries, TV Today, Sulzer, Blue Dart Express, Prism Cement, Goodyear (India), Gateway Distriparks, Aztec Software, Mahindra Lifespace and Ricoh India. In total, there were 24 new firms in the group of zero debt firms.