Private capital expenditure growth to revive after FY20, says India Ratings
Capital expenditure in the private sector is slowing in its growth and this is likely to go on till 2019-20, says India Ratings and Research. Most of the capex would now be in the form of maintenance and essential upgrades, it added. It estimates private sector capex to grow by Rs 1 trillion or five to eight per cent this year, better than the four per cent annual average of FY13-17. This annual growth was much higher during FY09-12 (13 per cent). For the study, India Ratings analysed the top 200 asset-heavy companies that have investments of Rs 64 trillion, about 85 per cent of the total adjusted gross block of 18,000 listed/unlisted corporates. In 2015-16, these companies were estimated to have cumulative debt of Rs 32 trillion. The reasons why capex is likely to grow slowly would be “weak domestic consumption demand, global overcapacity and negative impact of the goods and services tax (GST) on working capital,” the agency said in a report. The capex growth would be led by 125 non-stressed companies of the top 200 asset-heavy corporates.
These non-stressed companies expanded their capex by nine per cent annually in FY09-13. Their contribution to total capex in FY16-17 was 80 per cent, with capacity utilisation (CU) of 75-80 per cent.