Capital expenditure by the central government has exceeded the revised estimates of FY25 by 3 percent. According to a Jefferies report, there has been a 68 percent year-on-year rise in March in capex. The report estimates that rail, road, and defence companies stand to benefit from this sharp spike. HAL, Siemens, KEI, and L&T are some companies that are expected to benefit from the higher capex spend.
In the FY26 budget estimate, the Department of Economic Affairs received Rs 446 billion for capex, primarily for new schemes. However, only 15 percent of that has been utilised.
Rail and Road capex
In April, road capex was down by 1 percent on a YoY basis; however, in the fiscal year 2025, the overall road capex increased by 8 percent. This can largely be attributed to a sharp increase in March when road capex rose 73 percent YoY in March.
Rail capex grew was down by 4 percent YoY in March, but it bounced back in April when it registered a 4 percent YoY growth in April. The rail capex met the revised estimates of 4 percent growth in FY25.
Defence capex
Defence capex saw a big spike in April as by 122 percent YoY in April against the target of a 13 percent growth in the month. Defence capex in March grew by 25 percent on a YoY basis, which was required to achieve the FY25 revised estimate.
Jefferies’ report highlighted that as the Prime Minister recently hailed the use of defence equipment made in India, which was used in the India-Pakistan conflict, it points to an increasing focus on domestic defence manufacturing.
Transfer to states
The report says that in the last four years, the share of state transfer in the capex has risen by 12 percent. In FY21 share of state transfer in capex was 5 percent, which increased to 17 percent in FY25.
In March 2025, Rs 337 billion were transferred to states as a part of capex. In March, state share capex grew YoY by 105 percent. Further, state transfer capex achieved 125 percent of the FY25 revised estimate.
Companies in focus
Jefferies’ report pointed out that several companies are in focus in light of current capex trends. The report says that Siemens, which received a Rs 263 billion locomotive order from Indian Railways, should see a benefit in revenue and margins.
Jefferies estimates that HAL is expected to see a 19 percent EPS CAGR for the next five years. Further, L&T and KEI are also expected to clock stable growth on the back of this higher spend.