India Inc Set To Take Big Bets, To Double Capex To USD 850 Bn Over Five Years

New Delhi, Jun 11 (KNN) Indian companies are preparing for a significant expansion phase, with capital expenditure projected to reach USD 850 billion over the next five years, representing a doubling of current investment levels.

According to a new report by S&P Global Ratings, this ambitious spending program will be led primarily by the power and transmission, aviation, and green hydrogen sectors.

The investment surge is being driven by strong corporate balance sheets, robust operating cash flows, and supportive government policies that are encouraging companies to scale up their operations.

The country's top 100 listed companies, which generated combined revenues of USD 1 trillion and earnings before interest, taxes, depreciation, and amortisation of USD 150 billion in fiscal year 2024-25, are expected to finance most investments through internal funding sources, thereby maintaining manageable debt levels.

The power and transmission sector represents the largest component of the planned investment, accounting for approximately USD 300 billion or more than one-third of total projected capital expenditure.

This spending will focus heavily on renewable energy projects and grid infrastructure development as India works toward its target of 500 gigawatts of renewable energy capacity by 2030.

Major companies including NTPC Ltd, Tata Power, and Power Grid Corp are positioned to lead these initiatives.

Several industrial conglomerates have already announced substantial investment commitments.

The Adani group has outlined plans for USD 20 billion in annual capital expenditure over the next five years, while the Tata group intends to invest USD 120 billion, with particular focus on airlines, semiconductors, and electronics sectors.

Despite expectations that debt levels in the power sector will increase, with companies like NTPC and Tata Power potentially seeing debt-to-EBITDA ratios rise by approximately one times, S&P Global Ratings indicated that major players' credit profiles remain within acceptable parameters.

The aviation sector represents another significant investment category, with Indian airlines planning to spend between USD 75 billion and USD 100 billion on new aircraft acquisitions.

Led by IndiGo and Air India, carriers aim to triple their fleet sizes by 2035. The majority of this expansion will be financed through leasing arrangements, which should help limit pressure on company balance sheets.

While IndiGo appears well-positioned to manage this growth, Air India and SpiceJet may face greater financial strain during the expansion period.

Traditional industrial sectors including steel, cement, oil and gas, and automotive are projected to contribute USD 250 billion in cumulative capital expenditure.

Steel and cement companies are planning capacity increases of 25 million tonnes and 35 percent respectively, though their investment approach will be more gradual and dependent on internal cash generation.

Emerging sectors such as green hydrogen, semiconductors, and battery manufacturing are expected to attract between USD 50 billion and USD 100 billion in investment.

Companies including the Adani group and Tata Electronics are leading these initiatives, though the high capital requirements of these sectors will likely necessitate increased external debt financing.

Airport infrastructure represents a smaller but rapidly expanding investment category, with potential spending reaching USD 35 billion, particularly if planned greenfield projects and privatisation efforts proceed as scheduled.

Despite the scale of planned investments, Indian corporations are expected to rely less heavily on debt financing compared to previous investment cycles.

S&P Global Ratings estimates that banks and specialised financial institutions, including Power Finance Corp and REC Ltd, are positioned to provide substantial support, with up to USD 200 billion available for the power sector alone.

The domestic bond market is also evolving to support these investment needs, offering longer-term financing options and competitive pricing.

International demand for Indian corporate debt is returning, particularly for green bonds, as global capital seeks exposure to Indian credit markets.

Upon completion of this investment cycle, several Indian companies could establish themselves as global industry leaders.

NTPC may achieve 130 gigawatts of power generation capacity, IndiGo could operate a fleet of 1,000 aircraft, and domestic cement producers could compete with international majors such as Switzerland-based Holcim.

Companies including UltraTech and the Adani group are making substantial investments in new production facilities.

However, S&P Global Ratings has cautioned that capital-intensive sectors, particularly renewables, steel, and greenfield airports, face elevated credit risks due to execution uncertainties and commodity price volatility.

The rating agency noted that while India's corporate capital expenditure expansion represents a strategic investment in long-term competitiveness and scale, successful execution will be critical to avoiding potential balance sheet deterioration.

The investment program represents what analysts describe as a calculated approach to enhancing India's industrial capacity and competitive position.

If executed effectively, this capital expenditure cycle could mark a significant advancement in the country's manufacturing and infrastructure capabilities.

(KNN Bureau)