Analysis of Potential 12-13% Rise in Public Sector Capex Targets for 2024-25 – Impacts Across Industries and Key Takeaways

Analysis of Potential 12-13% Rise in Public Sector Capex Targets for 2024-25 – Impacts Across Industries and Key Takeaways

Source and Citation: News article from Economic Times published on Jan 22, 2024

Analysis for Layman

The article discusses plans to set capital expenditure (capex) targets for Central Public Sector Undertakings (PSUs) and departments for the next fiscal year. Capex refers to the money invested to upgrade infrastructure, equipment, and assets. The expected rise in capex for 54 major PSUs and departments is around 12-13% in 2025-26, reaching ₹8.2-8.3 lakh crore, compared to ₹7.3 lakh crore in the current fiscal year.

This signals the government’s focus on sustaining high infrastructure spending to revive growth post-pandemic, create jobs, and address socio-economic needs. The capex for PSUs until December 2023 was ₹5.5 lakh crore, showing a 22% year-on-year increase, indicating the capacity to absorb higher targets. The sustained push is seen as positive for hard infrastructure sectors closely linked to government capital spending.

Analysis of Potential 12-13% Rise in Public Sector Capex Targets for 2024-25 - Impacts Across Industries and Key Takeaways

Impact on Retail Investors

For retail equity investors, the potential rise in PSU capex targets has important implications:


  • Infrastructure stocks like L&T, KNR Construction, and cement firms are expected to benefit from higher public spending, improving order inflows visibility.
  • Operational PSUs across power, mining, oil, and gas are likely to invest more in productive assets, aiding profitability.


  • Higher capex can increase short-term borrowing costs for states and the center, putting upward pressure on bond yields.
  • While infrastructure stocks get support from sustained capex growth, investors need to evaluate the impact of associated fiscal pressures on interest rates.

Impact on Industries

Key industries poised to benefit include:

Infrastructure & Construction:

  • Direct demand boost for sectors like roads, telecom, railways, ports, and airports where PSU presence is high.

Cement & Building Materials:

  • Volume uptick for cement, steel, and allied industries supporting infrastructure build-out.

Banking & Financial Services:

  • Increased lending and project financing opportunities across PSUs and the allied ecosystem implementing projects.

Capital Goods & Machinery:

  • Heavy equipment and machinery for sectors like mining and construction are expected to see orders rise.

Both infrastructure facilitators and linked equipment industries are set to reap rewards.

Long Term Benefits & Negatives


  • Supports GDP growth through direct job creation across various infrastructure programs.
  • Builds a foundation for private sector capacity creation leveraging public investments.
  • Import substitution when capex focused on domestic procurement and self-reliance.


  • Risk of low returns on investment if capital misallocated towards low utility assets.
  • Higher short-term borrowing costs and bond yields if government spending reliance continues.

Quality infrastructure creation is critical for sustaining long-term economic prospects.

Short Term Benefits & Negatives


  • Improves economic momentum and demand across cement, steel, construction, etc.
  • Signals pro-growth policy direction aligned with long-term needs.


  • Pressures fiscal deficit targets and interest rates if funded through debt without enough revenue support.
  • Can crowd out private corporate capex in the short term if capital costs rise.

While boosting the outlook for infrastructure spending, prudence is required on the financing mix to optimize the trade-off between growth and stability.

Companies Impacted by Potential Increase in CPSE Capex:

Indian Companies Gaining:

  • Larsen & Toubro (BSE: 500520): L&T is a leading infrastructure engineering and construction company heavily involved in projects undertaken by CPSEs like railways, highways, and energy companies. Increased capex spending could lead to more project tenders and potentially boost L&T’s order book, revenue, and stock price.
  • Bharat Heavy Electricals Ltd. (BSE: 500124): BHEL is a major manufacturer of power plant equipment and boilers, serving the power generation sector dominated by CPSEs. Increased capex in power generation could translate to higher equipment orders for BHEL, potentially improving its financial performance and stock sentiment.
  • SAIL (BSE: 500312): Steel Authority of India (SAIL) is the largest public sector steel company in India. Increased infrastructure and construction activity driven by higher CPSE capex could lead to higher steel demand, benefiting SAIL’s production, sales, and potentially its stock price.
  • NTPC Ltd. (BSE: 511554): NTPC is the largest power generation company in India with a significant presence in coal-based and renewable energy projects. Increased capex in the power sector could lead to new project opportunities for NTPC, potentially raising its order book and boosting its stock price.
  • Indian Railway Construction Company Ltd. (IRCON) (BSE: 532939): IRCON is a leading engineering and construction company specializing in railway projects. Increased capex allocations for the Indian Railways could translate to more project contracts for IRCON, potentially improving its revenue and stock performance.

Indian Companies Potentially Impacted Negatively:

  • Private infrastructure companies: With CPSEs receiving increased capex, private infrastructure companies might face stiffer competition for project tenders. Limited project wins could put pressure on their revenue and stock prices.
  • Cement companies: While infrastructure spending might increase overall cement demand, the influx of CPSE projects could benefit state-owned cement companies more, putting pressure on private cement players’ market share and potentially negatively impacting their stock prices.

Global Companies Gaining:

  • Mining and equipment companies: Increased infrastructure and construction activity fueled by CPSE capex could lead to higher demand for mining equipment and materials. Global companies in this sector could benefit from increased exports to India.
  • Engineering and technology companies: Global companies with expertise in areas like renewable energy, smart infrastructure, and advanced construction technologies could see increased potential partnerships with CPSEs on larger projects, boosting their business prospects in India.

Global Companies Potentially Impacted Negatively:

  • Foreign construction companies: With Indian companies likely benefiting from the increased domestic capex, foreign construction companies might face stiffer competition and struggle to secure major projects. This could affect their Indian operations and potentially their global performance.

Market Sentiment:

The news of a potential increase in CPSE capex is likely to be positive for the Indian stock market, particularly for sectors like infrastructure, construction, and capital goods. Increased business opportunities and potential revenue growth for companies in these sectors could lead to higher stock prices. However, individual companies’ performances will depend on their specific capabilities and ability to secure contracts within the increased capex budget.

Please note that these are potential impacts based on the available information. The actual market reaction may vary depending on other factors not considered here.

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