Corp capex may touch Rs 8.5 L cr in FY24: ICICI Securities

The finance ministry expects nominal GDP growth of 10.5% to Rs 301.7 lakh crore.

After the last few years of capital expenditure and infrastructure investment being driven by the public sector, private sector investment is rebounding strongly and could touch Rs 8.5 lakh crore in the current financial year (FY24), ICICI Securities said in a research report.

“Corporates have started to contribute to capex upcycle as evidenced by the listed space capex growing by a robust 21 per cent Y-o-Y to Rs 7.6 lakh crore in FY23 and could likely reach Rs 8.5 lakh crore in FY24 assuming it keeps pace with nominal GDP growth,” said the report dated June 16, and authored by research analysts Vinod Karki and Neeraj Karnani.

The finance ministry expects nominal GDP growth of 10.5 per cent to Rs 301.7 lakh crore.

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As the chart shows, the bulk of capital expenditure in the economy has been recently driven by the public sector (centre, states and PSUs). Two years of Covid-19 pandemic and one year of the war in Europe led to a slowdown in private sector capex and supply chain disruption and rise in raw material prices hit their input costs.

The ICICI Securities report stated that the key positive drivers for the capex cycle in India currently are buoyant animal spirits in capital-intensive sectors such as energy, power, mining, infrastructure, construction materials, real estate, digital infrastructure and PLI-incentivised sectors. There is also “ample availability of financial resources and rising capacity utilisation and credit growth.”

It said that the capex boom will be under risk only due to some unforeseen financial upheaval or disruptive monsoon due to El-Nino conditions.

Recently, R Dinesh, chairman of TVS Supply Chain Solutions and president of industry body Confederation of Indian Industries had said that capacity utilisation across all sectors, including transport services, hotels, aviation, etc are all well above 75 per cent, the level at which corporates trigger capacity expansion investment. Dinesh had said that sectors like cement, steel, machinery, chemicals, all of them have exceeded 80 per cent capacity utilisation.

Last month, India’s Chief Economic Advisor V Anantha Nageswaran had also said that the private sector is poised to attain stronger investment growth following the strengthening of corporate and bank balance sheets, supported by the government’s capex push.