Capex by India Inc doubling over next five years to $850b: S&P Global

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Capital expenditure by major companies is seen doubling to $800-850 billion over the next five years with the corporate sector chasing growth opportunities, supported by trim balance sheets, according to a report by S&P Global Rates.

The projected capex is upto 2030, and the increase is from the previous five-year period. The spending is expected to be driven by investments in new energy and airlines companies, accounting for three-fourth of the increase in capex, the global rating agency said.

“In our view, Indian companies are well positioned for a growth run. Balance sheets are the leanest they’ve been in years,” it said.

Favourable government policies and a positive economic outlook had boosted demand in some sectors, and companies are expanding to meet this demand. “Successful execution of plans would enlarge their operational scale, providing lasting cost benefits and business efficiencies,” it added.

While the hefty spending plans were likely to strengthen the credit profiles of the companies, S&P cautioned that there were inherent risks arising from volatile input costs and product prices, especially in the power, steel and cement sectors.

The slow pick-up in private capex in India has been a source of concern, and this has been attributed to weak domestic consumer demand, arising from higher prices, job insecurity and an increasingly volatile global environment.

Airlines, power

Of the total capex the renewable power sector is seen spending the most at 28 per cent, followed by steel at 13 per cent and airlines and oil and gas at 10 per cent each.

Investments by traditional sectors such as infrastructure is seen doubling and industrials will rise 40-50 per cent.

Airlines and green energy would account for 15 per cent of total capex or 40 per cent of the increase in capex, the report said. “In absolute terms, investments in airports could double, or even triple during this period,” it said. In the airlines sector it forecast total investment to exceed $100 billion.

Conventional sectors such as steel, cement, oil and gas, telecom and autos will grow at a steadier pace of 30-40 per cent, while capex in transmission is projected at $100 billion.

Funding

A lot of the spending needs would be financed by internal cash flows, which would keep credit strains in check.

“Companies across sectors have deleveraged meaningfully over the past three to four years…,” said S&P, pointing out that earnings and operating cash flows across sectors were 60 per cent higher or double the levels from five years back.

For airlines, predominance of lease funding could moderate increase in borrowings, though in areas such as green hydrogen, semiconductors and battery plants, there could be significant debt funding, it said.

Corporates had a wide choice of funding sources, including banks, onshore and offshore capital markets and private credit. “We believe the banks have the capital strength to expand new loans at an average annual pace of 12%-13 per cent over the next five years,” it said.

Published on June 10, 2025

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