The gross block formation by India Inc’s top companies in the Nifty50 index has declined by 20.7 per cent to Rs 5.89 trillion in the financial year ended March 2024, compared to Rs 7.43 trillion reported by these companies (excluding finance) in the financial year ended March 2023, according to the annual reports submitted by the companies to the stock exchanges.
The combined gross block formation and capital work in progress is down mainly because Reliance Industries, India’s largest company by value, reduced its consolidated capex in FY24 to Rs 1.39 trillion from Rs 2.45 trillion reported in FY23, as per statistics in RIL’s annual report. Excluding RIL, the gross block formation—the total value of a company’s assets, including depreciation—remained almost flat for the rest of the Nifty50 companies.
Despite cutting gross block formation, RIL topped the list in gross block formation in FY24, followed by the government-owned oil producer ONGC at Rs 68,418 crore. Aditya Birla Group’s holding company Grasim’s gross block formation was Rs 46,612 crore, and NTPC, the government-owned electricity producer, had a gross block formation of Rs 43,614 crore. “UltraTech has embarked on a capacity expansion drive on a scale that is globally unprecedented in the cement sector. In FY24 alone, the company increased its cement production capacity by 13.3 MTPA through expansion projects. In April this year, the company marked a historic milestone of 150+ MTPA production capacity. This capacity surpasses 150 per cent of the capacity in the United States and constitutes 80 per cent of Europe’s capacity,” Kumar Mangalam Birla told the shareholders on Wednesday. UltraTech Cement plans to invest Rs 32,400 crore (nearly $4 billion) in ongoing capital expenditures over the next three years.
For the past few years, the investment scene in India has been dominated by the government’s record-high capital expenditures, but private investments in the manufacturing sector have remained muted. Weak domestic consumption, tepid external demand, and a flood of cheap Chinese imports have made Indian companies cautious about expanding manufacturing capacities. India Inc leaders have said they are waiting for consumption to rise before they spend on creating new manufacturing capacities.
According to the Reserve Bank of India (RBI), capacity utilisation in the manufacturing sector stood at 76.8 per cent in the March quarter of FY24, the highest in 11 years. The healthy balance sheets of banks and corporates, the government’s thrust on capex, and visible signs of a pickup in private investment are expected to drive fixed investment activity in the future, as per the RBI’s monetary policy statement of August 8.
Interestingly, for the coming years, Indian conglomerates have announced massive investment plans led by the Tata and Adani groups. The Tata Group has announced plans to invest $120 billion (Rs 10 trillion) across its companies, including in its airline business. The Adani Group has unveiled a $100 billion (Rs 8.39 trillion) investment plan over the next decade, primarily targeting new airports, ports, and green energy projects. Adani officials said they have made arrangements for funding the entire expansion plan for the next few years, based on their projections. Reliance Industries, India’s largest company, is set to invest $60 billion (Rs 5.03 trillion) over the next decade, according to estimates by Morgan Stanley.
In June, JSW Group increased its investment target to $70 billion (Rs 5.87 trillion), focusing on new ports, steel, and infrastructure projects by 2030. “The company’s capex during the June quarter was Rs 4,466 crore and Rs 228 crore on upfront payment for mining. We expect consolidated capex for FY25 to be about Rs 20,000 crore,” JSW Steel’s Joint MD and CEO, Jayant Acharya, said after the June quarter results.
(With inputs from Sameer Mulgaonkar)
First Published: Aug 16 2024 | 5:36 PM IST
