India Strategy - Combined Capex On Track To Exceed Rs 21 Trillion In FY23: ICICI Securities

ICICI Securities Report

Private corporates’ capex in the listed space nudged up further to an all-time high of Rs 7 trillion on a trailing twelve-month basis versus Rs 6.4 trillion in FY22 driven by capital intensive industrial corporates.

Combined government capex has risen to an all-time high of Rs 12.3 trillion on a TTM basis (Centre Rs 7 trillion and states Rs 5.3 trillion) and is likely to exceed Rs 14 trillion in FY23E going by Budget estimates and current trends.

Central capex includes special assistance as loans to states for capex (Rs 1 trillion) which so far has seen sub-par spending going by the overall loans disbursed under the ‘capital expenditure ‘head.

Cash flow from operation/capex ratio for listed corporates dips to 1.5 times as capex and working capital requirement picks up while CFO is also impacted by a sharp drop in realisations and cost pressures for commodity companies (oil marketing companies, metals, cement and other industrials).

Declining CFO/capex ratio will eventually result in rising demand for industry credit as expanding capex and working capital requirements will no longer be fulfilled by internal cash generation.

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