Buoyant on a rebounding economy, rising demand growth and helped by various government initiatives, India Inc is loosening its purse strings with a 14% increase in capex plans for FY24. The rising trend in capex is expected to continue at least for another three years, according to company executives and analysts.
For FY24, Adani Green Energy is hiking its capex by 133% to Rs 14,000 crore, UltraTech Cement by 107% to Rs 12,800 crore, Tata Power by 85% to Rs 12,000 crore, Jindal Stainless (JSL) by 79% to Rs 2,500 crore and ACC/Ambuja by 65% to Rs 7,000 crore. Further, companies such as Apollo Tyres, Wheels India, Maruti Suzuki, JSW Steel, Power Grid Corp, Tata Motors, Coal India and Tata Steel, among others, have also stepped up their capex plans.
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“Our infrastructure capex will be driven majorly by the government’s capital spending. Capacity utilisation is improving, demand is growing and with ‘Made in India, Made for the World’, manufacturing is also looking good,” Jayant Acharya, joint MD & CEO, JSW Steel, said.
According to Crisil, the capex is expected to grow 12-14% to Rs 6 trillion in FY24. New-age sectors like green hydrogen, solar modules and semiconductors may hike their capex 4x in FY24, increasing their share in overall private capex to 11% from 3% in FY23.
The capex of 748 non-BFSI companies had risen 16-18% in FY23, while the PLI and new-age sectors (including non-PLI solar modules, green hydrogen) accounted for 1% of capex spends in FY22 and 10% in FY23.
“Looking at the sectoral mix, we find that capex of metal companies, pharmaceutical and oil and gas players are on the rise. An analysis of over 40 sectors indicates that in FY24 and unto FY27, nearly 40% of the cumulative capex would be driven by oil and gas, metals and cement players (commodity play). Beyond this, 14 PLI-linked capex and new age sectors would account for 15-20% of the capex,” Hetal Gandhi, director-Research at Crisil Market Intelligence and Analytics, said.
“Most players are set to cross their decadal average utilisations in FY24,” he added.
Maruti Suzuki, the country’s largest car manufacturer, will incur a capex of Rs 8,000 crore for FY24, up 33% compared with Rs 6,000 crore in FY23. The company uses it for various initiatives, including for construction of a new plant in Haryana, new model launches and annual maintenance, its CFO Ajay Seth said.
For this fiscal, Tata Motors has earmarked Rs 8,000 crore capex, up 14% compared with Rs 7,000 crore in FY23, which it will use for new product development and capacity enhancements. New Delhi-based Apollo Tyres will use ?680 crore, of the total ?1,100 crore, for India operations. These would be for digitalisation and enhancement of productivity through debottlenecking.
JSW Steel will use Rs 18,800-crore capex to complete its 5 MTPA brownfield expansion at Vijayanagar and ramp-up of capacity at Bhushan Power & Steel, add downstream capacities and for backward integration of its mining facilities, Acharya said.
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According to JSL executive director & group CFO Anurag Mantri: “The capex would be largely met from internal accruals and would be mainly used for the completion of the two recent acquisitions – Jindal United Steel (JUSL) and New Yaking. A portion would be used as sustenance capex.”
GAIL India has earmarked a capex of Rs 10,000 crore, for which it intends to borrow up to Rs 7,000 crore, its chairman and managing director SK Gupta said.
However, a number of companies have slashed capex plans.
Hindalco Industries, an Aditya Birla Group company, has slashed capex plans by nearly half to $4.5 billion to be spent in the next five years, citing margin headwinds at its US subsidiary Novelis. It also cited inflationary pressures, including on energy prices in Europe, and lags in cost pass-throughs as reasons.
Hindustan Zinc’s capex for FY24 is lower by 54%, Adani Enterprises by 26%, Bajaj Auto’s 25%, Ceat’s by 21% and that of Indian Oil is down by 14%.