India Inc to double capex to $850 billion over the next five years

Business Standard

a day ago

Corporate India is embarking on an ambitious investment drive, with capital expenditure expected to double to as much as $850 billion over the next five years, according to a report by S&P Global Ratings. Indian power, electricity transmission lines, airlines, and green hydrogen sectors will spearhead the spending spree, the report said.
Driven by strong balance sheets, robust operating cash flows, and favourable government policy, Indian companies are aiming to scale up operations in what could be a defining expansion phase. The top 100 listed companies, with a combined revenue of $1 trillion and $150 billion in EBITDA in fiscal 2025, are expected to fund most of the investment internally, keeping leverage in check, the report said. Unlisted renewable energy and airline companies with large capex plans were also considered by the firm in preparing the report.
"Companies are investing to capture growth, supported by macro tailwinds and deeper domestic funding markets," S&P analysts wrote. "Execution will be key to avoiding balance sheet slippage."
The power and transmission sector will account for roughly $300 billion in new investment—more than a third of the total projected capex. Renewable energy projects and grid infrastructure are expected to dominate the agenda as India pursues its 500 GW renewable capacity target by 2030. NTPC Ltd., Tata Power, and Power Grid Corp. are set to lead the charge. The Adani group has already announced $20 billion in annual capex over the next five years, while the Tata group is planning to invest $120 billion mainly in airlines, semiconductors, and electronics sectors.
Airlines are another major investment engine, the report said. Indian carriers led by Indigo and Air India are set to spend $75 billion to $100 billion on new aircraft, tripling their fleet size by 2035. Much of this will be lease-financed, helping limit the pressure on balance sheets. Indigo is seen absorbing the expansion with relative ease, while Air India and SpiceJet may face more strain.
Traditional sectors like steel, cement, oil and gas, and autos are projected to contribute $250 billion in cumulative capex. Steel and cement alone are ramping up capacity by 25 million tonnes and 35 per cent, respectively, though their investment will be more gradual and reliant on internal accruals.
Emerging sectors such as green hydrogen, semiconductors, and battery plants are poised to attract $50 billion to $100 billion in investment, led by giants like Adani Group and Tata Electronics. However, funding needs for these high-capex sectors will likely require more external debt.
Airports, a smaller but rapidly growing component, may see investments rise to $35 billion, particularly if greenfield projects and privatisation efforts proceed as planned. Yet, long lead times and regulatory delays raise execution risks.
Despite the scale of the capex, Indian corporates are expected to rely less on debt than in previous cycles. S&P estimates that banks and specialised financial institutions like Power Finance Corp. and REC Ltd. are positioned to provide significant support—up to $200 billion in the power sector alone.
The onshore bond market is also maturing, offering longer tenors and competitive pricing. "Offshore demand is returning, especially for green bonds," the report noted, pointing to deepening capital pools chasing Indian credit.
By the end of this investment cycle, several Indian companies could emerge as global leaders. NTPC may reach 130 GW of power capacity, Indigo could operate a fleet of 1,000 aircraft, and cement players could rival global majors like Swiss-based Holcim. Ultratech and the Adani group are investing heavily in adding greenfield capacity.
Still, S&P cautioned that capex-heavy sectors—particularly renewables, steel, and greenfield airports—face elevated credit risks due to execution uncertainty and commodity price volatility.
"India's corporate capex boom is a calculated bet on long-term competitiveness and scale," S&P concluded. "If executed well, it could mark a structural step-up in the country's industrial capacity."