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After much cajoling, India Inc has finally opened up its purse and started announcing big-ticket investments and putting money on the table.
Kumar Mangalam Birla-led Grasim Industries, which has announced a ₹10,000-crore plan for its debut in the decorative paint segment, will inaugurate its first plant at Panipat in Haryana next week before the Ludhiana and Chamarajanagar plants go live in Punjab and Karnataka. The company will deploy ₹5,000 crore in six paint plants in the first phase.
Adani Green Energy has started producing 551 MW of solar power from the world’s largest renewable energy park in Gujarat’s Khavda, which will be supplied to the national grid. Adani Green expects the park to create 81 billion units of clean electricity and create over 15,200 green jobs.
The Adani Group, which has committed ₹55,000 crore investment in Gujarat by 2025, claims to have already invested ₹50,000 crore.
Shridatta Bhandwaldar, Head-Equities, Canara Robeco, said the private capex cycle has already begun across sectors as corporates have de-leveraged their balance sheet and businesses are generating good cash, while banks are also now willing to fund expansion projects with the lowest bad loans on books.
Moreover, he added rewarding shareholders through dividends has become unattractive for both corporates and shareholders, and this has led to companies using the profit earned to plough it back into the business through capex on expectations of higher demand.
Arvinder Singh Nanda, Senior Vice-President of Master Capital Services, said the optimism of Indian corporates is reflected in business performance during the just-ended December quarter, and most of the companies have posted better-than-expected numbers. The overall earnings grew 34 per cent year-on-year against 28 per cent last year in the same period, he added.
Future perfect
India’s structural demand visibility, supply-side measures such as growing infrastructure spend and production-linked incentive schemes by the government are expected to drive the capex cycle of the corporate sector in the coming days, especially in the consumer-facing sectors.
Though there has been a slowdown in the FMCG sector, analysts believe the sector is adjusting to consumer preference for premier products and a marginal slowdown in mass consumption products due to weak rural sentiments.
The easing input cost pressure and strong demand should boost profits in the financial year 2024-25 by 2.90 per cent above FY23 levels, helping corporates maintain adequate rating headroom despite higher capex, according to a recent Fitch Ratings report.
“We believe India’s structural demand visibility, supply-side reform by the government and healthier corporate and bank balance sheets will enable a further increase in capex across most sectors following an uptick in FY23.
JSW Group has announced projects worth ₹1.10 lakh crore in the last two weeks, besides acquiring a 38 per cent stake in MG Motor India for ₹2,800 crore.
Maruti Suzuki India has plans to invest about ₹32,000 crore to establish an automobile plant in Gujarat to produce about one million vehicles a year, besides its parent Maruti Suzuki pumping in Rs 3,200 crore to ramp up electric vehicle capacity of its wholly owned subsidiary Suzuki Motor Gujarat to 10 lakh units from 7.5 lakh.
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