Indian firms may have Rs 4 lakh crore excess working capital: Report

It excludes financial institutions, automobile manufacturers, infra and real estate corporations

Top Indian companies might be having excess working capital of Rs 4 lakh crore, says a report.

Giving the estimate on the excess working capital that might be available with the domestic companies, global consultancy EY on Monday said firms need to execute focused programmes to release such funds towards growth activities.

"A high-level comparative analysis indicates that Indian companies may have up to Rs 4 trillion ($60 billion) in excess working capital, over and above the level they require to operate their business model efficiently and meet all their operating requirements. This figure is equivalent to nearly 9 per cent of their combined sales," EY said in a report.

According to the report, there is a significant potential for improvement in operations of the companies.

"To stay competitive in the global market, Indian companies need to establish and execute focused programmes to release free cash from working capital to fund growth," it noted.

Further, the report said companies should explore traditional and innovative working capital funding techniques with the aim to improve the overall cash flow position.

The conclusions are based on a review of the working capital performance of leading 500 companies — in terms of sales — headquartered in India.

It excludes financial institutions, automobile manufacturers, and infrastructure and real estate corporations.

"Our overall analysis draws on companies' latest fiscal 2016 reports and compares performance in 2016 with that in 2015 and the previous four years," EY said.