Corporate India may be sitting on Rs 46,424 crore (Rs 464.24 billion) in cash, but some companies at least are loosening their purse strings this year, even if modestly, and spending money on expansion and new projects.

With the economy having gone into a tailspin more than four years ago, companies have not been investing in adding capacities.

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Instead, they have been putting their money in government securities and mutual funds. Hindustan Lever, for example, had investments of Rs 2,397 crore (Rs 23.97 billion) on its books last year. It put Rs 1,197 crore (Rs 11.97 billion), almost 50 per cent of this, into gilts.

And even though interest rates have been falling, corporate profits have been on the rise, leaving companies with plenty of cash to play around with.

Explains Indian Rayon President and CFO Adesh Gupta: "Companies had been cutting costs for the last few years and most have become much more working capital efficient. This has released a lot of cash from operations.

"Hence, though interest rates have come down, more money in treasury operations has ensured a higher interest income for companies."

But Gupta concedes that the increased treasury operations is only a temporary phenomenon. "This is happening owing to the lack of economic activity. Once activity picks up, Corporate India will utilise the cash in building or acquiring capacities."

Agrees Tata Steel's vice-president (finance) R C Nandrajog: "Investments in mutual funds and inter-corporate deposits are just a temporary allocation of funds."

Some of the bigger companies, which see the wisdom of acquiring global operating scales, are now pushing ahead with capital expenditure.

Reliance Industries vice-chairman and managing director Anil Ambani told Business Standard: "For the current fiscal year, Reliance Industries will use its cash accruals in four areas: investments in infocom, petroleum retail, oil and gas exploration and production and expansion of its petrochemicals business."

Of the planned capital expenditure in 2003-04, Rs 1,500 crore ( Rs 15 billion) will go into infocom, Rs 1,000 crore (Rs 10 billion) into oil retailing, Rs 2,500 crore (Rs 25 billion) into oil production, Rs 300 crore (Rs 3 billion) into oil exploration, Rs 500 crore (Rs 5 billion) into refining and Rs 500 crore (Rs 5 billion) into petrochemicals, Ambani added.

That means Reliance will be investing in all Rs 6,800 crore (Rs 68 billion) -- the company had total cash of Rs 13,626.15 crore (Rs 136.26 billion) in 2002-2003, including investments in group companies, in other companies and in bank balances.

A senior executive at AV Birla group company Hindalco said, "The company will be utilising its excess cash to further expand its aluminium and copper smelter capacities."

While Hindalco has almost concluded its ongoing Rs 1,800 crore (Rs 18 billion) expansion of its aluminium smelter capacity to 340,000 tonne, this year it will begin to invest in enhancing the capacity of its copper smelter.

Grasim, which has cash and cash balances of over Rs 2,000 crore (Rs 20 billion), will be utilising most of this money to fund the acquisition of L&T's cement business. But it will also be spending around Rs 350 crore (Rs 3.5 billion) in the next two years on captive power plants and so on.

Even Satyam Computer Services, which had Rs 1,535 crore (Rs 15.35 billion) cash balances on March 31, 2003, thanks to its American Depository Shares issue in 1991, has lined up a few expansion plans.

It is constructing a campus in Bangalore, in addition to which it plans to expand its facilities as and when the need arises. The Bangalore campus is expected to be ready for operations soon.

The company is also on the look out for acquisitions, and the management indicated in July this year that it was evaluating a few companies. Satyam believes in keeping over 90 per cent of its funds in bank fixed deposits.

"We do not want to play with this money by putting it in riskier avenues such as stock markets or any other such instruments," says V Srinivas, a director and chief financial officer of Satyam.

Wipro too will use its war chest for acquisitions. "The cash that Wipro has is primarily meant for strategic acquisitions and we have demonstrated our willingness to do so," according to K R Lakshminarayana, Wipro corporate treasurer.

"The moment we feel we have cash in excess of our requirements, we will return it to the shareholders," he adds.

Others, meanwhile, continue to use their cash to cut their debt. "Tata Steel utilised its excess cash to repay debt to the tune of Rs 400 crore (Rs 4 billion) last year and will be further reducing its debt by the same amount in the current year," Nandrajog says.

The steel major has cash and cash balances of over Rs 1,664 crore (Rs 16.64 billion). Tata Motors, which is sitting on about Rs 1,600 crore (Rs 16 billion) of cash, too plans on using the major portion of its recent $100 million foreign currency convertible bonds in reducing debt, while part of its earlier rights issue proceeds of 2001-2002 will go into product development.

Still, many companies continue to cling on to cash. Infosys Technologies has just announced a Rs 250-crore (Rs 2.5 billion) expansion of its Pune centre.

But responding to a question as to when its cash ceases to be an asset and becomes a liability, Nandan Nilekani, managing director, told the media during the announcement of the last quarterly results, "At this point we believe it is a strategic asset."

Other corporate heavyweights are banking on mutual funds this year too. ITC invested Rs 673 crore (Rs 6.73 billion) in 2002-2003 in the debt schemes of mutual funds.

The post-tax returns of about 10 per cent on these instruments were attractive. This year, with the schemes becoming entirely tax free, this has become an even more attractive investment, top ITC sources say.

At Bajaj Auto, vice-president (finance) Sanjeev Bajaj says that the two-wheeler company is using its cash to establish itself globally, to take on the fierce competition in the market and re-establish itself as the market leader in the two-wheeler segment.'

"This money will also act as a deterrent to the other companies from slashing their prices drastically as they know we have the resources to take on their challenge," says Bajaj.