New Delhi: Indian companies in the steel, cement, consumer electronics and electric mobility space 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 this year.
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, the Economic Times mentioned in a report.
“In today’s time, every passing day is a lost opportunity if we do not have enough capacity,” the publication quoted Dilip Oommen, chief executive of ArcelorMittal Nippon as saying. 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.
Various other factors are also supporting the capex plan of Indian corporates. Record low interest rates, availability of sufficient liquidity in the system and robust global demand are also aiding capex across industries, the publication mentioned citing 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,” the business daily quoted Vinod Karki, head of strategy at ICICI Securities as saying.
Tata Steel has allocated around Rs 7,500 crore for India growth in the ongoing fiscal. That is nearly 70% of its planned Rs 11,000-crore global capex. Similarly, JSW Steel and Jindal Steel & Power have also announced capacity expansion plans.
In the cement sector, companies are expected to add 55-60 million tonnes per annum of manufacturing capacity over the next three years, as per Crisil Research. India’s cement manufacturing was around 500 million tonnes in FY20.