Indian Companies Set To Spend $45-50 Billion In Capex Over Two Years, Says Moody’s

Indian companies are expected to spend $45–50 billion annually over the next two years as the capital expenditure cycle kicks off amid healthy corporate earnings, according to Moody's Ratings.

"Capex by corporate sectors in India and Indonesia will remain high over the next two to three years. Overall capacity utilisation for the manufacturing sector in both countries is already quite high, while consumption continues to grow on the back of population growth and a favourable demographic profile," Moody's said in a report Tuesday.

The global rating agency expects Indian companies to invest in new capacity to meet ongoing consumption growth, with a large proportion of their capex being funded through internal cash flows. Investments to increase vertical integration and achieve net zero targets will also keep spending high, it said.

The oil and gas sector and Reliance Industries Ltd. will collectively account for over 60% of the rated Indian portfolio's spending over the next couple of years, it said.

Moody's expects rated companies in the automotive, metals and mining, technology, media and telecommunications sectors to account for around one-third of total capex, spending $15–16 billion each year.

What will support the earnings of these companies across sectors will be infrastructure spending, increasing domestic energy consumption, and rising demand for connectivity, the global rating agency said.

Another driver of capex will also be government policies that emphasise the growth of the manufacturing sector. The government's promotion of manufacturing as a basis for economic development and job creation will support capacity expansion and continued capex over the next few years, the report said.

While improving the domestic liquidity and internal cash flows of Indian companies can cover a portion of their capital needs, funding through offshore channels will remain an important route.