Asian companies hoard record cash; RIL, NTPC in top 15 cash rich company list

Asian companies hoard record cash; RIL, NTPC in top 15 cash rich company list

A recent report by Moody's Investors Service highlights that non-financial corporates in the emerging Asian markets are cash rich, despite noises over global economic conditions, and have been building their positions for expansion, acquisitions and liquidity. The report which excludes private companies and companies based out of Japan and Australia, estimates that rated Asian corporates have built up cash holdings of about USD 230 billion. India's Reliance Industries and NTPC figure at 6th and 11th spot respectively in the list of top 15 cash rich companies. The region rated corporates' aggregated cash balance comprising cash, cash equivalents, deposits, and short-term investments has increased significantly, by almost 60% since end-2008. Total cash reached USD 228 billion by mid-2010, up from USD 194 billion at end-2009 and USD 145 billion at end-2008. The top three corporates in Asia accounted for about one-third of the region's cash, while the top 15 accounted for about 60%. As expected, investment-grade companies dominated the list. The details of the top 15 companies with publicly disclosed cash holdings are listed below. Moody's estimates are based on a rated sample of about 120 Asian corporates.

What has led to the cash sedimentation?

The factor responsible for this rise (almost 60%) in cash holdings from end-2008 to mid-2010 mainly includes improved operating performances. "Indeed, the balance sheets of Asian corporates are in good shape, and the speedy recovery of the Asian economies, coupled with a temporary halt in expansion spending, has allowed companies to accumulate cash over the last 12-18 months," says Allen.

"Moreover, Asian corporates have historically maintained higher cash balances than their US counterparts, and continue to do so. This is partly a cultural practice and partly a reflection of the lower reliance on committed credit facilities in Asia," says Elizabeth Allen, a Moody's Vice President and Senior Credit Officer.

Furthermore, the bond markets are open to companies' fund-raising, a situation many have taken advantage of, using the proceeds for refinancing as well as building up their cash reserves.

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