Fitch Predicts 10-12% Capex Increase For Indian Corporates In FY24

The rising capital expenditure (capex) trend of Indian corporates is expected to continue and grow at 10 to 12 per cent per year during the next fiscal year to March 2024, according to Fitch Ratings.

According to Fitch, spending was flat from FY19 to FY21 and increased 16 per cent in FY22. The forecasts are for the country's eight state-owned businesses and 21 privately held Fitch-rated corporates.

“We believe that growth opportunities arising from India's recent supply-side policy steps, domestic corporates focusing more on localisation, and multi-nationals looking to reduce risk in global supply chains may attract higher private investment in the medium term,” the rating agency's analysts wrote.

However, slower-than-expected progress may pose risks.

Government changes such as the goods and services (GST) tax act, the bankruptcy code, and more recent measures such as a lower corporate tax rate, the PLI (production-linked incentive) schemes, and increasing state spending on infrastructure, according to the rating agency, may further boost investments.

In recent years, Indian banks have fixed non-performing loans and reduced credit costs, and they are well positioned to support corporate funding requirements, according to the report.

However, currency pressures from high commodity prices and a weak global economic outlook pose risks to India's investment demand, as the country remains a net energy importer and exports 21 per cent of its production, according to Fitch.

“Rising interest rates amid inflationary pressures may also dampen the capex outlook for corporates with a smaller scale and/or a weak financial profile. However, the long-term nature of the majority of capex drivers should mitigate these risks in the middle run,” Fitch said.