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India Inc. to invest $45-50 billion annually over next 1-2 years
Industry News- Aug 21,24
Moody’s projects that rated Indian companies will invest approximately $45 billion to $50 billion annually in new capacity over the next one to two years.
India's corporate sector is expected to sustain high levels of capital expenditure (capex) over the next two to three years, driven by strong demand and high capacity utilisation in the manufacturing sector, according to a recent report by Moody’s. The credit rating agency attributes this trend to ongoing consumption growth fueled by population expansion and favorable demographics.
Moody’s projects that rated Indian companies will invest approximately $45 billion to $50 billion annually in new capacity over the next one to two years. A significant portion of this investment will be led by Reliance Industries, which alone accounts for about 30% of the portfolio capex, with an annual budget of around $15 billion across its various business segments.
In addition to Reliance, seven rated oil and gas companies in India are expected to contribute another 30% to the total capex. These companies will allocate around $15 billion annually to expand existing capacity and invest in green energy initiatives aimed at reducing carbon transition risks. Notably, Oil and Natural Gas Corporation Ltd (ONGC) and Indian Oil are expected to invest $6 billion and $4 billion, respectively, over the next two years in reserves addition, downstream integration, and energy transition efforts.
Government policies focused on boosting the manufacturing sector are also anticipated to support continued capex growth. These policies, aimed at fostering economic development and job creation, will drive capacity expansion and sustained investment over the coming years, Moody’s noted.
The report further highlights that companies in the automotive, metals and mining, and technology, media, and telecommunications (TMT) sectors will account for roughly one-third of the total capex, spending between $15 billion and $16 billion annually. For example, JSW Steel plans to invest around $5 billion over the next two years to increase steel production capacity, enhance raw material security, and expand downstream operations to produce more value-added products.
Moody’s also pointed out that the combination of high capex and refinancing needs will likely push non-financial companies in India to seek funding from offshore debt markets, though the share of such financing in their overall funding mix may decline from historical levels.
The rating agency expects consolidated earnings for rated Indian companies to grow by 5% annually over the next two years, driven by broad-based growth across sectors such as telecommunications and automobile manufacturing. Indian companies are seen as relatively insulated from external economic shocks due to the large domestic market, with infrastructure spending, rising domestic energy consumption, and increasing demand for connectivity expected to support earnings across multiple sectors.
(Fortune India)
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