Just like ordinary investors, Reliance Industries (RIL), the most cash-rich company in the private sector, played it safe with its investments in 2011-12.
Its latest annual report shows that it sharply increased its time deposits with banks and invested more in debentures from institutions such as HDFC this year. It also moved money out of fixed maturity plans (close end mutual funds) to park it in short-term debt funds that allow any-time withdrawals.
Over the year, RIL trebled its investments in certificates of deposit with scheduled banks. This was a departure from the previous year, when the company parked most of its money in mutual funds. The company invested Rs 15,720 crore in certificates of deposit in 2011-12, compared with Rs 4,632 crore the previous year. Interest rates on certificates of deposit rose steadily from 7.3 per cent to 11.5 per cent last year, as a scramble for deposits prompted banks to raise rates for large corporates.
Another Rs 6,247 crore was invested by the company in debentures and bonds. This was up 35 per cent over 2010-11. RIL's two largest bond buys were of Housing Development Finance Corporation (Rs 1,822 crore) and IDFC (Rs 1,060 crore).
RIL's mutual fund investments fell 0.5 per cent to Rs 5,057 crore during the fiscal. But within mutual funds, RIL trimmed exposure to fixed maturity plans and switched to short-term debt and dynamic bond funds. These are actively managed to capitalise on rising rates on corporate paper. It invested Rs 1,021 crore in bond funds from Birla Sunlife, DWS, ICICI and LIC mutual funds.
It made minimal bets on government securities, at Rs 5 crore.
As of March 2012, the company's cash balances and short-term investments totalled Rs 66,627 crore. This was a 60 per cent jump from the same date last year. According to the company's annual report, its current investments rose by 87 per cent to Rs 27,029 crore. Apart from this, it also chose to hold to plenty of liquid cash. After investments, the company's cash and bank balance registered healthy growth to Rs 39,598 crore.