India’s top corporate companies could double their capital expenditure over the next five years, says a S&P Global Ratings report. The report further suggests that the capex growth by the leading Indian companies will be primarily driven by revenue and profit growth.
S&P projects India’s corporate capital spending to reach about $800 billion by FY30, largely driven by infrastructure investments.
“Improving infrastructure, political stability, and lean corporate balance sheets are propelling large expansion plans that will widen revenue bases for Indian corporates,” said Neel Gopalakrishnan, S&P Global Ratings credit analyst.
He added that the supportive government policies are helping the capex from the private sector. The policies, such as domestic self-sufficiency, more exports, and development of a supply-chain ecosystem, are aiding in capex growth.
“Our baseline view is that India’s growth momentum will stay strong, and its industrial base and supply chains will get deeper and more efficient,” said Gopalakrishnan.
India Vs China: Capex trajectory
The S&P report suggests that the capex growth by the Indian companies over the next five years is similar to that of China’s capex growth, when its corporate sector accelerated spending in the 2000s.
The report says that India’s policies are also similar in scope to the momentum that created years of rapid expansion and market gains for China’s corporate sector in the 2000s.
China’s expansion in the 2000s was driven by reduced trade barriers, significant foreign investment, and double-digit GDP growth.
“Indian companies will face tighter financing conditions than their Chinese counterparts during their high-growth phase. Such conditions, however, could help Indian companies avoid a large debt buildup as occurred for many Chinese corporate sectors,” the ratings firm said.