Capex Takes Off

A lean, deleveraged private sector is looking for expansion, putting investments back on track.

- Joe C. Mathew

ON JUNE 24, Mukesh Ambani, the Chairman and Managing Director of Reliance Industries Ltd. (RIL), said his company achieved a net debt-free balance sheet after raising $44.4 billion through a mix of equity sale, rights issue and asset monetisation in FY2021. Addressing shareholders virtually at the 44th Annual General Meeting, he announced a mega investment in sunrise sectors. “Initial investment from our internal resources in the new energy business will be over $10 billion in three years,” he said. RIL registered a net profit of ₹53,739 crore in FY2021, 34.8% more than the previous year.

The growth template laid out by India’s largest business enterprise is not something unique. Hundreds of Indian companies have been utilising the Covid-19 induced economic disruption to become leaner and financially healthier. This means they are ready to make fresh investments in capacity addition and expansion.

JSW Steel, for instance, plans to spend around ₹28,000 crore to expand steel-making capacity from 24.5 million tonnes (MT) to 36.5 MT by March 2024, Tata Motors is investing ₹28,900 crore – in subsidiary Jaguar Land Rover and hydrogen fuel cell vehicles – in FY2022, while Adani Ports and SEZ Ltd. is planning a capital expenditure (capex) of about ₹4,000 crore in FY2022. Similarly, Aditya Birla Group has budgeted ₹2,600 crore for capex this year, while another group entity, Ultratech Cement Ltd, has set aside ₹1,500 crore. Telecom major Airtel says its FY2022 capex may be $5 billion, up from $4.6 billion the previous year, as it gets ready to offer next generation services (including 5G) in the coming years. The list goes on.