India Inc.’s Capex Boom – Explained for Investors


An Economic Times article reports that India Inc.’s appetite for capital expenditures remains robust despite global uncertainties, signaling the start of a private investment boom.

Analysis for layman:

Capex refers to capital expenditures or funds used by companies to acquire, upgrade, and maintain physical assets like property, buildings, technology etc. India Inc. is a collective term for the country’s private corporate sector.

The article cites data showing private capex in India crossed $80 billion in FY23, 4X the 5-year average. This displays corporates’ confidence in India’s economic potential and their willingness to make large future-oriented investments here despite current global volatility.

A capex tracker index from researcher Avendus Spark also shows readings at 12-year highs, driven by factors like private capex announcements, imports of capital goods etc. Separately, bank lending for capex needs also rose 80% in FY23. Top executives of major Indian conglomerates like L&T, Pidilite, Thermax confirmed they are accelerating investments into new facilities and capacity expansions.

The positive capex cycle is attributed to rising utilization levels signalling growth opportunities, and the government’s own record spending in infrastructure acts as a force multiplier. With balance sheets deleveraged, credit availability, and sentiment on India’s prospects improving, India Inc. is gearing up for a private investment boom.

India Inc.'s Capex Boom

Original Analysis:

The ET report provides solid evidence that India is witnessing early signs of an unprecedented private sector-led capex mega cycle playing out. Multiple indicators – actual project spending, lending data, management commentary all validate this.

Contradicting typical conservative mindsets, India Inc. is displaying vision and ambition to place big bets on domestic growth regardless of near term headwinds. The private sector adding muscle alongside the government’s infrastructure push bodes very well for job creation and sustaining robust GDP expansion over years.

The missing piece so far had been private investments lagging amidst weak demand and bloated corporate balance sheets. With utilization rising and deleveraging addressed, those shackles are breaking. This capex wave then can turbo-charge the Indian economy ahead provided supportive policy continues encouraging long-term risk appetite. Execution challenges remain however in terms of clawing back lost time.

Impact on Retail Investors:

For retail investors, the capex boom indicates India Inc.’s confidence in the economy and is a major positive. Sectors that gain from higher private investments like capital goods, infrastructure, manufacturing, real estate could offer good stock ideas to ride this wave.

Stocks of major industrial groups like L&T, Adani that supply to infrastructure build out stand to directly benefit. Construction enablers like cement and housing finance lenders also get a boost as projects transform into reality. Facilitators of the capex cycle – engineering consultants, systems integrators, logistics providers merit a relook too.

Retail investors should analyze if their existing portfolio has adequate exposure to stocks that stand to gain. Reviewing allocations to cyclical sectors as growth outlook improves also helps capture the upside.

However, higher promoter equity investments does indicate their own stock valuations factoring in expected strong earnings growth ahead. Retail buyers should wait for dips or corrections rather than chasing prices higher. Competitive intensity could also rise in pockets as new capacities come onboard. So stick with established sector leaders over risky fringe players. Use the news to identify themes and stocks leveraged to the private capex uptick.

Impact on Industries:

The industries most impacted from accelerating private capex will be:

Infrastructure & Capital Goods:

Capex boom to significantly benefit players in roads, power, ports, airports etc where scale up is needed. Also capital goods makers supplying heavy machinery and engineering equipment to projects across sectors. Order inflows for the likes of L&T, BHEL, Thermax, ABB etc to ramp up.

Real Estate:

Residential and commercial building developers to gain as demand conditions improve with investments flowing. Also construction enablers like cement, tiles to see volume growth given major lift to project execution on ground.


Increased lending towards infrastructure and business projects to drive credit growth for both private banks and PSU banks. Also loan turnover and income sources to rise.

Auto & Ancillaries:

Vehicle demand set to receive boost as consumption appetite revives on the back declining uncertainty. Commercial vehicle makers to benefit directly from infrastructure activity resurgence. Auto parts suppliers to see orders swell as OEMs expand capacities in anticipation of sales uptick ahead.

Overall, accrual of first order benefits to these sectors directly in sight over the next few years as projects transform from paper to field. Competition however set to be intense as most players rush to expand to tap into growth.

Long Term Benefits & Negatives:

The private corporate capex boom promises to deliver significant structural long term benefits:

Economic Growth Enabler: Sustained double digit GDP growth over years requires robust fixed asset formation and productivity boosters. The capex wave drives job creation both directly and indirectly via ancillary industries. Income generation then spurs more consumption allowing the positive domino effect to prevail. Make in India Boost: Domestic manufacturing gains as India Inc. invests in new factories closer to demand centers instead of importing overseas capacity. This saves forex outflows while building supply chain resilience too against external disruptions. Infra Development: World-class transport connectivity, clean energy, digital access ect. allows various sectors to efficiently grow around such facilities over decades. Sectors being built ground up like EVs and renewables to achieve global scale given domestic capex appetite. However, some long term negatives need acknowledgment:

Asset Bubbles: Excessive leverage and irrational exuberance associated with past emerging economy investment booms has often ended in asset price crashes, NPAs, wealth destruction at overheated peaks. Signs of the same need monitoring. Inflation Pressures: While supply enhancement is positive, demand boost on the back of income and credit expansion could worsen imported inflation if domestic output fails matching purchasing power in pockets.

Short Term Benefits & Negatives:

In the short term, over the next 1-2 years, the accelerated private capex holds both positives and drawbacks:


Sentiment Upswing: Consensus earnings upgrades across sectors and bullish stock market momentum is likely as visibility on growth improves. This allows existing investors to benefit. Credit Expansion: Increased lending to productive areas like infrastructure, manufacturing will drive higher credit growth, improving capital intermediation quality after years of tepid trends. Operating Leverage: As demand prospects turn favorable amidst supply constraints currently, players across industries will move to add capacities to tap into growth opportunities. This allows fixed costs advantages to swell profits. However, some short term negatives:

Execution Risks: A sudden spike in project activity after a prolonged lull can strain contractor and vendor resources resulting in teething troubles, delays or cost overruns in some cases. Rising Rates: If the capex deluge also fires up consumption demand rapidly, RBI may be compelled to hike rates more aggressively to cool inflation – risking growth moderation. Input Cost Pressures: A swarm of new projects simultaneously may create lags in key raw material availability like cement, steel. Players may again need to battle cost inflation before supply catches up across materials.

Companies gaining:

Top companies likely to directly gain include:

  • Larsen & Toubro: Core beneficiary being India’s largest infrastructure & capital goods conglomerate. Balance sheet strength, execution capabilities make it primed to ride a mega public and private capex cycle ahead.
  • Ultratech Cement: With housing and infrastructure projects set to pick up substantially, cement majors like Ultratech with pan-India production reach stand to gain market share and pricing power on demand revival.
  • Tata Motors: Commercial vehicle sales could exponentially benefit as infrastructure creation gathers steam over years. Being the category leader, Tata Motors invested ahead of the curve to tap this demand tailwind.
  • Siemens: The German electrical, automation and digitization major counts infrastructure build out and factory modernization as core strengths. Stands to gain immensely consulting and equipping projects.
  • SBI: India’s largest lender is at the forefront to cash in on opportunities from term lending needs of infrastructure and industry balance sheet expansion. Credit growth and services fees to drive higher profits.

Companies losing out:

While most sectors stand to gain indirectly, some specific companies that could face pressure from India Inc.’s expanding capex plans include:

  • Importers: With domestic manufacturing investments rising, imports particularly from China in several industrial intermediate categories could witness a decline over coming years. Stocks like Hitachi Home & Life Solutions and Dixon Technologies may need strategy pivots.
  • Small Private Banks: Mid-sized lenders with focus only on retail assets may see market share losses as credit expansion shifts towards project and corporate loans. Valuations may moderate for Federal Bank, RBL Bank etc.
  • Airlines: Aviation firms are vulnerable if rising interest costs and inflation dampen consumer discretionary demand as their cash flows remain fragile after Covid losses. Indigo, SpiceJet need to ginger up premium category play.

Additional Insights:

Past investment cycles driven by excessive exuberance or loose regulations have resulted in systemic risk build ups for India. However, prudent financial sector oversight this time and significant balance sheet deleveraging separating the wheat from the chaff make this a healthier trend. Sectors like telecom and power still need policy reform push.


In summary, the ET report validates that India Inc. is gunning for domestic capacity creation signalling potential advent of an investment megacycle. This private capex resurgence alongside public spending may put the economy on a sustainably higher trajectory ahead.

Citation: Vijayaraghavan, Kala and Shyam, Ashutosh R. “India Inc’s Capex Cycle may Move into Top Gear.” The Economic Times, 15

error: Content is protected !!
Scroll to Top

Subscribe to Profitnama to access all articles, explanations, stock analysis
Already a member? Sign In Here