Top 5 cash generating companies of India | Highest free cash flow companies - YouTube

Hi, I hope that your investment journey is going well.

When you and I invest, we think about how to earn maximum returns.

We keep looking for stocks that give us the highest returns.

While researching, we look at many factors like how much sales has the company made, profit, dividends, debt, return on equity, and many more.

Another important factor that we can keep in mind while doing stock research is free cash flow.

So, in today's video, we will tell you about 5 such companies which have the highest free cash flow.

In this video, we will cover all about the business of stocks and also their key strengths and potential risks or weaknesses.

A holistic view of companies to help you in miles.

Apart from this, in the last, we will also look at some key financial metrics of all companies in a table.

We have selected the stocks taking care that these companies are fundamentally strong.

So in this list, we will tell you about the stocks whose:

Market cap is more than Rs.5000 crores,

Return on Equity (ROE) is more than 15%,

Debt to Equity Ratio is less than 1

Net profit margin is more than 10%.

Before going into these 5 companies, let us know what is free cash flow and why it is so important while doing stock research.

A company needs cash to maintain its operations and capital assets (capital expenses i.e. fixed expenses like land, machinery, etc.)

After paying all this the cash left with the company is called free cash flow (FCF).

This free cash flow can be used by the company for dividends to its investors, repayment of creditors, and growth of the company.

Free cash flow is very important as it tells us how efficient a company is in generating cash.

The more efficient the company, the more it can pay dividends, do buybacks, and invest in the growth of the company.

And most importantly whether it has the power to give back the money to its creditors.

This metric is important for an investor as it gives an insight into the financial health of the company and helps in making the right decision.

While doing research, we should also take into account other metrics like return on equity, debt to equity ratio, and earnings per share.

This is the ratio which I just told you, you can know in detail in the video.

So let's start today's list.

The first company is TCS Limited

TCS is part of the Tata Group and the company provides IT Services, Consulting, and Business Solutions.

It provides information technology goods and services- business process outsourcing, application development, consulting capacity planning, and enterprise software services.

As of 23 April 2022, TCS had a free cash flow of ₹37000 crores.

TCS has a lot of debt, and the company has given a very good Return on Equity (ROE) in the last 3 years, which is 39.99%.

Its biggest strength is its global presence, which spans North America, the United Kingdom, Africa, Europe, and the Asia-Pacific region.

Not only this, TCS provides services to a wide variety of industries such as banking, finance, retail, telecommunications, and media and entertainment.

Due to providing services to so many different industries, it is not dependent on anyone industry.

A big risk for the company is the increasing competition in the industry as companies like Infosys, Wipro, Capgemini, Deloitte, Accenture, etc. are in the space.

In addition, all IT companies have been facing an industry-wide high attrition rate, rising staff, and other costs in recent times.

Due to this, their margins get affected.

So now how Indian IT companies including TCS handle the challenge, you should keep an eye on it.

The second company is Infosys Limited.

Infosys is a company that provides services such as consulting, technology, and next-generation digital services.

Infosys' Free Cash Flow of Rs. 21724 crores.

One of the core strengths of Infosys is its complete business solution services.

It offers its clients a wide range of consulting services, end-to-end business services, software-based services, and business consulting.

And, another biggest strength of Infosys is its low human resource cost which is much lower than other global players.

And as we discussed the challenge in the case of TCS, the same challenge applies here as well.

The third company is Vedanta Ltd.

This company is a diversified natural resource group that deals in Exploring, Extracting, and Processing Minerals and Oil & Gas.

Vedanta is involved in the exploration, production, and sale of zinc, lead, silver, copper, aluminum, iron ore, etc.

The free cash flow of the company is Rs. 17,262 crores.

One of the key strengths of Vedanta is that it has got customers globally and is a leader in the industry.

And, the company has so far entered into a joint venture with Foxconn Technology Group of Taiwan to manufacture semiconductors in India.

The company is thinking of targeting smartphones and electronics, this joint venture can be a good opportunity.

A major risk for the company is the possible interference of the government in the mining industry which could reduce their efficiency.

And, because people are becoming eco-friendly, the company will have to follow all the rules, otherwise, they may be harmed.

Fourth is HCL Technologies Limited

HCL Tech is a global IT services company, one of the five largest Indian IT companies.

It focuses on transformational outsourcing, software-led IT solutions, remote infrastructure management, engineering and R&D services, and BPO.

Its free cash flow as of 23 April 2022 was Rs. 15,345 crore.

Its' biggest strength is its high-grade R&D team focused on innovation.

The company has developed strategies that differentiate it from its competitors as its focus is on reskilling, training, and capabilities.

A major weakness is that the company has taken very risky bets

such as investing around $1.1 billion in intellectual property and future product production plans,

which are too old and may not be able to deliver value to their competition.

Last is Hindustan Aeronautics Limited.

Hindustan Aeronautics Limited is a government company engaged in the business of manufacturing aircraft and helicopters.

In addition, it is also involved in the repair and maintenance work of aircraft and helicopters.

The company's free cash flow as of 23 April 2022 was Rs. 13,946 crores.

The biggest strength is that the company has created a brand in the industry, so they can charge a premium which their competitors cannot.

And this thing is also reflected in their net profit margin which is 14.23%.

This is the highest among the company's peers.

And while innovation is generally rare in such an industry, Hindustan Aeronautics has successfully pursued consumer-driven innovation.

They get the complete product mix for their customers and also provide their services in different segments.

A major weakness is the control of the government as the company belongs to the government, and their interference and regulation can be more.

And it becomes very difficult to change the specialist working in the company and also to bring in new talent.

Let's look at the key financial and technical ratios now of these 5 Shares.

As you can see on your screen, we have shown some key financial and technical ratios of all companies.

We have included a valuation ratio in the form of price-to-earnings ie P/E ratio.

We have included the solvency ratio in the form of the debt to equity ratio and also include a profitability ratio in the form of return on equity.

Also, we have also included 5 years of sales growth so that for the sake of idea lag, how fast the business of these companies is happening.

Again we have also shown 5-year returns of the companies so that our viewers can also see the long-term stock performance.

And finally, we have also included the values of 2 technical indicators so that you can see the stocks from a technical perspective as well.

We have used 2 indicators- 200 Day Moving Average i.e. 200 DMA and RSI (14).

If a company's stock price is trading above the 200 DMA, the stock can be considered bullish.

And if the price is trading like a niche than the 200 DMA then the stock can be said to be bearish.

In terms of RSI, RSI values ​​above 30 are generally considered oversold, and thus a trend reversal ie a downtrend can lead to an uptrend.

Similarly, an RSI value above 70 is considered overbought, and a trend reversal is likely.

So these were the 5 companies that have the highest free cash flow.

We remind you that these videos are for educational purposes only, and do not recommend any kind of buy/sell.

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