As outlook for economic activity brightens: India Inc building capex muscle for heavy lifting


From steel and cement to consumer electronics and electric vehicles, Indian companies have drawn up extensive capital expenditure plans for this fiscal year, as plants are running at near-full capacities and they expect the pace of economic activity to pick up.

Capacity expansion, deferred capex from last year and investments driven by the government’s production-linked incentive scheme will be the three key capex drivers, experts said.

Companies such as ArcelorMittal Nippon Steel, Vedanta, Hindalco, Grasim, Ceat and Mahindra & Mahindra have significantly increased their capex plans for FY22, compared with the preceding years.

“In today’s time, every passing day is a lost opportunity if we do not have enough capacity,” said Dilip Oommen, chief executive of ArcelorMittal Nippon. The company has lined up an investment of Rs 50,000 crore to double its steel production capacity at Hazira, Gujarat, to 18 million tonnes.

An ongoing commodity super cycle — or a period of excess global demand — is driving capacity addition at metals companies, which have increased exports since last year.

In other sectors, companies that had suspended or gone slow on capital expenditure during the first wave of the pandemic are now confident of investing despite the ongoing deadlier second wave, as they expect a repeat of last year, when demand returned, even with a pent-up effect for many, as soon as the situation started improving.

Commodity Super Cycle

Favourable factors such as low interest rate, availability of sufficient capital in the system — both internally, due to better cash flows and externally, from banks and the capital markets — and robust global demand are also aiding capex across industries, said experts.

“The commodity boom is an important factor because it really moves the needle in terms of the quantum of capex, given that the sheer size of investment by these core sector companies is much larger,” said Vinod Karki, head of strategy at ICICI Securities.

has allocated around ₹7,500 crore for India growth in the ongoing fiscal. That is nearly 70% of its planned Rs 11,000-crore global capex.

“…Better performance in FY21 has enabled us to continue critical capital expenditure focused on India,” Tata group chairman N Chandrasekaran wrote in a letter to Tata Steel shareholders, which was released on Thursday along with the company’s annual report.



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