Cloud over capex plans: Capacity utilisation of India Inc hits new low

Adani Group is also planning to invest in new ports, airports, and logistics capacities by participating in the government's divestment programmes

India Inc’s asset-turnover ratio declined to a new low of around 70 per cent in FY21, indicating a further decline in capacity utilisation across sectors last financial year owing to the pandemic. This raises a question on the companies’ ability to kick-start a fresh round of capacity expansion. The ratio was 78 per cent in FY20 and a record high of 116 per cent in FY06.

Analysts expect a rise in the asset-turnover ratio and capacity utilisation in FY22 but say companies go for capacity expansion only when the figure approaches around 100 per cent.

“The asset-turnover ratio is a good indicator