'Interim Budget has ignited the entrepreneurial spirit.'
Is private capex picking up?
In the Interim Budget speech, Union Finance Minister Nirmala Sitharaman said p'rivate investments are happening at scale.'
The big-ticket investments are from the big guns of industry -- from Mukesh Ambani, Gautam Adani, Sajjan Jindal, and Lakshmi Mittal to the Tata group.
Some of these announcements are for the medium term, some are imminent.
But according to some industry players, private capex revival is not a broad trend, as yet.
According to Rajashree Murkute, senior director, CareEdge, private capex in India has been muted in FY24 as compared to central and state-led capex. However, Murkute expects this to change in FY25.
Rising sectors
Energy transition is gaining traction and major investments are being pledged.
Reliance Industries intends to invest up to $10 billion in building an energy ecosystem.
Adani Group will sink $100 billion over the next decade to achieve an energy transition. Of the $100 billion, 70 per cent is for clean energy.
The group is building three giga factories with plans to develop solar panels of 10 Gw (gigawatt), wind turbines also of 10 Gw, and hydrogen electrolyser of 5 Gw.
The group is also expanding its renewables portfolio to 45 Gw.
In a December statement, Tata Power shared plans for a capex of Rs 60,000 crore by FY27; 45 per cent of this would be deployed in the renewables sector.
Pumped storage hydropower power projects with a capacity of 11.98 Gw have been granted environment-related clearances by a committee of the ministry of environment, forest and climate change.
This is the largest tranche of new-tech energy storage projects to be approved in one go in the country.
The investment for eight projects is Rs 81,981 crore (Rs 819.81 billion), spread across five states.
In power transmission, during April-December 2023, 35 projects connecting green energy projects/zones with the national grid were offered under the bidding route.
The size of projects totalled about Rs 60,000 crore (Rs 600 billion).
While state-owned Power Grid Corporation led the pack on the winners' list, private players such as Sterlite Power, Tata Power, and Adani Energy Solutions bagged sizable projects.
In its Q3 results, Adani Energy Solutions said it had an under-construction transmission pipeline worth Rs 17,000 crore (Rs 170 billion).
'Green hydrogen 'and 'battery chemicals' are buzzwords now. Gurugram-based ACME Group is setting up a Rs 27,000 crore (Rs 270 billion) green hydrogen plant in Odisha.
It has signed an offtake term sheet for supplying green ammonia from its project in Odisha to IHI Corporation, a Japanese integrated company.
ACME is also investing Rs 5,000 crore (Rs 50 billion) to build a green hydrogen facility in Oman.
In the pharma space, Sun Pharmaceuticals' organic capex is expected to remain $200 million to $250 million annually, according to a CRISIL ratings rationale of January.
Cashing in on infra boom
The steel space is seeing a lot of action with top producers -- Tata Steel, JSW Steel, AM/NS India, and Jindal Steel & Power -- in a major investment phase.
According to ICRA Senior Vice-President Jayanta Roy, a fresh capacity of around 11 million tonnes per annum (mtpa) is expected to come onstream this financial year.
In base metals, a planned capex of Rs 8,000 crore (Rs 80 billion) to set up a 2 million tonne greenfield alumina refinery in Odisha is underway at Hindalco Industries and will be completed in 36 months, starting November.
Vedanta plans to spend $1.7 billion as capex in FY24.
Demand driving auto
The auto industry is on the cusp of major growth and companies are committing themselves to large-scale investment plans.
Maruti Suzuki India plans to spend about Rs 1.25 trillion on capex between FY24 and FY31, the company had said in October 2023.
Tata Motors doesn't share its capex split.
But P B Balaji, Group chief financial officer, Tata Motors, said: 'Investment made so far this year is around 2.3 billion pounds for Jaguar Land Rover, Rs 6,000 crore for the passenger vehicle, commercial vehicle and electric vehicle businesses of Tata Motors.'
Capex on ground
Some of the capex has started flowing in. Some companies have disclosed the capex during 9MFY24.
JSW Steel's was Rs 13,249 crore (Rs 132.49 billion) during this period; consolidated capex for FY24 has been estimated at Rs 18,000 crore. This is part of the capacity expansion to 37 mt in India.
Tata Steel's consolidated capex during 9MFY24 stood at Rs 13,357 crore (Rs 133.57 billion). Expenditure is primarily on the 5 mt expansion at Kalinganagar, Odisha, and relining a blast furnace at its Netherlands unit.
UltraTech spent Rs 6,922 crore (Rs 69.22 billion) in the nine-month period till December 2023 (up to Rs 13,000 crore till FY27).
Reliance Industries' capex for the quarter ended December 31, 2023, was Rs 30,102 crore (Rs 301.02 billion) with investment in the pan-Indian 5G rollout, expansion in retail infrastructure, and the new energy business.
According to Tata Motors' third quarter investor presentation, investment spending is estimated at Rs 8,000 crore.
CEOs Set To Take advantage Of Rs 1 Trillion Innovation Fund
With the Interim Budget indicating the road ahead for the economy, Indian companies are planning to invest more in coming months as they expect consumer demand to revive substantially.
A dipstick poll of 12 CEOs after the Interim Budget shows 66.67 per cent of the respondents are planning to spend on creating fresh capacities because the Budget has given clear directions to companies to be ready for government orders.
Interestingly, 25 per cent of the respondents do not expect consumer demand to revive though an overwhelming number of them (75 per cent) expect it to pick up.
Finance Minister Nirmala Sitharaman announced a 17 per cent increase in infrastructure spending to Rs 11.11 trillion for 2024-2025 (FY25).
The bulk of the fresh investment is expected to be made by infrastructure companies, which are expecting a jump in orders from the Indian Railways, including metro; roads and highways; and existing and new airport companies.
This is a good indicator of what will come in the Budget in July. There is a significant increase in capital expenditure for infrastructure, taking the outlay to Rs 11.1 trillion.
However, if we look at the likely spending in FY24, it will be about Rs 9.5 trillion.
So, essentially, the increase will be about 17 per cent in real terms.
This should translate into robust domestic demand, spurring private investment and job creation, said the CEO of a large firm.
Of the CEOs, 58.33 per cent said they would take advantage of the Rs 1 trillion innovation fund announced in the Budget.
The minister said the fund would encourage the private sector to scale up research and innovation significantly in sunrise domains .
"India's Interim Budget has ignited the entrepreneurial spirit," said the CEO of an oil company. "The massive innovation fund, coupled with infrastructure investments in sunrise sectors like artificial intelligence and quantum computing, is a game-changer."
"This push unleashes a wave of opportunity for new-age businesses, empowering us to accelerate technological advancements and propel India towards economic leadership," the CEO added.
"We will see major capex in sunrise domains, energy, infrastructure, and digitisation over the next few years," the CEO predicted.
Another CEO said the finance minister's decision to continue the push to capital expenditure would further help the country overcome the slowdown of the economy due to the pandemic, and help in giving domestic industry confidence and the room to invest.
At present, top conglomerates led by Reliance Industries, the Adani group, Tata group and JSW are planning a massive expansion in the renewable energy sector, airports, telecom and steel.
The Adani group is planning to invest $100 billion by 2030 to create fresh capacity in renewable energy and doubling cement capacity.
Dev Chatterjee with Sohini Das, Aneeka Chatterjee, Ajinkya Kawale, Ishita Dutt and Subhayan Chakraborty, Amritha Pillay and Shreya Jai.
Feature Presentation: Aslam Hunani/Rediff.com
