India Inc pushes capital expenditure as capacity utilisation nears 75%

With India Inc’s average capacity utilisation touching the 74 per cent mark, according to the Reserve Bank of India (RBI), top Indian conglomerates are finally pressing the pedal on capital expenditure.

According to a report by Motilal Oswal Financial Securities (MOSL), private sector capital expenditure (capex) has started ramping up from select sectors, which will get another leg up from thermal power, production linked-led capex and semiconductor capex.

Last week, Tata Electronics and Powerchip Semiconductor Manufacturing Corp (PSMC), Taiwan, announced plans to invest Rs 91,000 crore in Dholera, while Tata Semiconductor Assembly and Test Private Limited announced plans to invest Rs 27,000 crore in Assam.

“The Tata Group has a tradition of pioneering many sectors in the country, and we are confident that our entry in semiconductor fabrication will add to this legacy,” Tata Sons Chairman N Chandrasekaran said after announcing a slew of investments in the semiconductor business.

Other conglomerates are also leading the investment plans. Aditya Birla announced plans to invest Rs 10,000 crore in the paints business.

The Adani Group is leading the capex plans in the infrastructure sector as it expects to report record Ebitda (earnings before interest, tax and depreciation) of Rs 80,000 crore for the financial year ended March 2024, with Rs 1 trillion for 2025.

It will invest in data centres, airports, roads, ports and power generating units in the coming quarters with equity investments expected from sovereign funds from West Asia.

Last week, it announced Rs 75,000 crore in Madhya Pradesh. 

“We will invest close to Rs 30,000 crore to ramp up power generation capacity at our Mahan Energen plant in Singrauli from its current 1,200 megawatts (MW) to 4,400 MW. We will also invest close to Rs 28,000 crore to set up 3,410 MW capacity pumped storage projects,” Pranav Adani, a director of Adani group said.

Reliance Industries is also investing in a battery giga factory in the new energy business vertical that will be ready by 2026 even as its capex in Reliance Jio in 5G rollout is almost over.

The JSW Group has announced plans to invest Rs 40,000 crore in an electric vehicles capacity in Odisha apart from investing an additional Rs 65,000 crore in a new steel plant.

The Vedanta Group is planning to invest up to $2.3 billion per annum for the next three years, with funds allocated towards the aluminum, power, oil and gas and zinc businesses.

Earlier this month, the RBI said the investment cycle is gaining steam, aided by sustained thrust on government capex, increasing capacity utilisation, rising flow of resources to the commercial sector and policy support from schemes such as production linked incentive (PLI).

“Our survey suggests that investment intentions of private companies remain upbeat and services and infrastructure firms are optimistic about overall business conditions,” the RBI said.

Leaderboard: Recent private capex announcements

 

BPCL: Targets Rs 1.5-1.7 trillion capex in 5 years

Maruti Suzuki: Rs 1.25 trillion spending in 8 years

ONGC/IOC: Rs 1.2 trillion for expansion

JSW Steel/EV: Lines up Rs 1 trillion to raise capacity

Tata Power: Rs 60,000 crore capex over 3 years

Tata Motors: Rs 38,000 crore

UltraTech: Announces third capex round worth Rs 13,000 crore

Amul: Sets aside Rs 11,500 crore to expand operations across six states

Adani Enterprises: To spend $1.5 billion on data centres

Cairn India: To double annual capex to $1 billion in 5 years