India Inc’s Cash Buffer Declines for First Time in Three Years as Debt Rises

India Inc’s financial landscape is showing a clear shift, with large listed companies drawing down cash reserves while simultaneously increasing borrowings — a trend seen as an early sign of a private capex revival.

An analysis of 339 companies from the BSE 500 index (excluding BFSI and oil & gas) by Ace Equity shows that cash reserves fell by over Rs 43,000 crore between March 31 and September 30. Total cash declined from Rs 7.8 trillion to Rs 7.36 trillion.

This is the first time since September 2022 that India Inc’s cash buffers have dipped.

Debt Levels Rising Sharply

Alongside the cash drop, companies increased their leverage.
Gross debt rose by Rs 2.04 trillion, reaching Rs 29.15 trillion as of September 30 — the sharpest increase in three years.

This parallel movement — falling cash and rising borrowings — suggests companies are deploying internal accruals and raising debt to fund expansion. Improving demand visibility, normalising supply chains, and easier financing conditions have supported this trend.

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Capex Revival Gaining Pace

Experts say the decline in cash reserves is not a sign of stress but a reflection of capital deployment.

Narendra Solanki, Head – Fundamental Research (Investment Services), Anand Rathi Shares and Stock Brokers, said overall trends are improving despite some cyclical factors such as interest rates, inflation and capacity utilisation adding volatility.

According to Solanki, private capex rebounded strongly in Q2 FY26.
After declining in Q1, capex crossed Rs 15 trillion in Q2, pushing H1 FY26 investment to Rs 34 trillion, a 22.4% growth.

Manufacturing, heavy machinery and infrastructure remain the core drivers of this capex cycle.
Key sectors include industrials, machinery, roads, power, transmission & distribution, and railways.

Emerging segments like renewables, digital infrastructure, electronic manufacturing and semiconductors are also gaining traction.

Shift From Balance Sheet Repair to Utilisation

A senior Mumbai-based equity analyst said that companies are moving from a phase of deleveraging to a phase of deploying capital.

“For a long time, India Inc focused on deleveraging and conserving cash. What we’re seeing now is a likely shift from balance sheet repair to balance sheet utilisation,” the analyst said, noting support from lower rates, strong demand visibility, and government-led infrastructure spending.

Balance Sheets Still Stable Relative to Sales

While absolute cash and debt numbers may look concerning, experts note that relative ratios point to continued strength.

According to Solanki:

• Debt as a percentage of sales has remained within 0.68–0.72 over the past six quarters, with only a marginal rise recently.
  → This indicates leverage remains stable.

• Cash as a percentage of sales has increased gradually from 16.7% to 18.4%, averaging 18%.
  → This suggests corporates have actually strengthened liquidity in proportion to revenue.

Outlook

The data points to a turning point in India Inc’s investment cycle, with falling cash reserves reflecting rising deployment rather than financial stress. With macro indicators supportive and demand improving, analysts expect private capex to accelerate further in H2 FY26 and FY27.

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