India Inc sitting on huge cash reserves, raising money through IPOs: SBI Research

Indian corporates are sitting on record cash reserves and aggressively tapping capital markets to raise funds, bypassing traditional bank loans in the process, SBI Research said in its latest report. This shift could potentially weigh on bank credit growth, even as the Reserve Bank of India (RBI) cuts rates and injects liquidity to stimulate lending.

Data shows that money raised from equity—via initial public offerings (IPOs), follow-on public offers (FPOs), offer for sale (OFS), REITs/InvITs and QIPs—more than doubled in FY25 to ₹3.71 lakh crore from ₹1.90 lakh crore in FY24.

While equity infusion bolsters long-term balance sheet strength and supports future debt-raising capacity, in the near term, it appears to be reducing dependence on banks, SBI Research noted.

India Inc. (excluding BFSI) has increased its cash and bank balances to an estimated ₹13.5 lakh crore in FY25, up from ₹5 lakh crore in FY14. Sectors such as IT, automobiles, refineries, power, and pharma are leading this cash build-up.

This surge in internal liquidity, along with a healthy 22% average EBITDA margin and moderated wage growth of 12% over the past four years, has enabled corporates to retain earnings and deleverage.

Loan growth among listed companies (ex-BFSI) was just 8% in FY25, while capital grew by 15%, improving debt-equity ratios from 0.71 to 0.67, the research arm of the country’s largest lender said.

Apart from equity markets, companies are also relying more on commercial papers (CPs) and external commercial borrowings (ECBs).

CP borrowings rose 14.4% in FY25 to ₹15.7 lakh crore, as firms took advantage of lower interest rates in the CP market compared to bank loans. In the first quarter of FY25, CP issuances soared to ₹3.95 lakh crore, up from ₹3.2 lakh crore in the same period last year, SBI Research said.

Meanwhile, ECBs have also emerged as a preferred funding source for capital expansion and modernisation. This trend, aided by the RBI’s Large Corporate Framework since April 2019, is also subtly displacing domestic credit demand.

In order to address slowing credit growth, the RBI has slashed the repo rate by 100 basis points and reduced the Cash Reserve Ratio (CRR) by 100 bps to 3%.

The CRR cut is expected to inject ₹2.5 lakh crore of liquidity into the banking system by December 2025 and reduce banks’ cost of funds.

Around 60.2% of loans are now linked to External Benchmark Lending Rates (EBLR), making transmission of rate cuts more efficient, while the remaining 35.9% linked to MCLR will adjust with a lag, SBI Research said.

Banks are also facing a structural challenge with the ongoing financialisation of household savings.

The share of equities in household savings doubled from 2.5% in FY20 to 5.1% in FY24, potentially reducing the pool of bank deposits, SBI Research added.