Wednesday, December 11, 2024
Home » Corporate Story » Corporate capex growth slows in FY24 after picking up pace in FY23

Corporate capex growth slows in FY24 after picking up pace in FY23

June 19, 2024
Corporate Story
0

Hey, like this? Why not share it with a buddy?

After picking up pace in 2022-23 (FY23), growth in capital expenditure by the corporate sector in capacity expansion and new projects slowed in 2023-24 (FY24). The combined fixed assets of India’s top 990 listed companies, excluding banks, financial services, and insurance (BFSI) and stockbroking firms, increased by just 7.6% year-on-year (Y-o-Y) in FY24, down from 12.2% a year earlier.

The slowdown was across the board and companies in most key sectors. The combined fixed assets of the non-BFSI sector excluding oil and gas companies (including Reliance Industries) were up 6.3% Y-o-Y in FY24, down from the 9.9% a year earlier. Similarly, the combined fixed assets of non-BFSI companies excluding oil and gas and mining and metals companies were up 5.4% Y-o-Y in FY24, slowing from the 8.9% a year ago.

Oil, gas, mining and metal companies — such as Reliance Industries, Oil and Natural Gas Corporation, Indian Oil, Tata Steel, JSW Steel, Hindalco, and Coal India — are two of the most capital-intensive sectors in the country. The firms in these two sectors together accounted for 30 per cent and 15 per cent of the fixed assets of all companies, respectively, in the sample in FY24. The combined fixed assets of oil and gas companies were up 10.9 per cent in FY24, slowing down from the 18.7 per cent growth reported in FY23.

Similarly, the fixed assets of mining and metals firms were up 9.8 per cent in FY24, down from the 13.9 per cent Y-o-Y growth in FY23. Capex growth in FY23 was the highest in the last nine years and raised hopes of revival in private-sector investment. The slowdown in corporate investment last financial year has belied them. The combined fixed assets of the 990 companies increased to Rs 69.7 trillion at the end of FY24 from Rs 64.74 trillion a year earlier.

With this, these companies’ fixed assets have increased at a compound annual growth rate (CAGR) of 7.6 per cent in the last five years (FY19-24), up from the 6.9 per cent during FY14-19 but down from 15.7 per cent during FY09-14. The fixed assets include cumulative investment in tangible and intangible assets minus accumulated depreciation plus capital work in progress.

There is little financial imperative for private capex growth in the country right now. Sales growth for non-financial firms was nearly flat in FY24 and companies were busy protecting their margins and profits rather than tying up capital in capacity expansion or new projects. The combined net sales of the 990 companies were up just 2.1 per cent Y-o-Y in FY24, down sharply from the 23.2 per cent in FY23 and 31.9 per cent in FY22.

In comparison, these companies combined net sales grew at a compound annual rate of 6.9 per cent between FY14 and FY19 and 13.9 per cent during FY09-14. After the slowdown in FY24, these companies combined net sales have grown at a CAGR of 7.7 per cent during FY19-24. FMCG companies are growing in low single digits; chemicals firms have seen a sharp decline in price realisation; capacity utilisation in cement was only 70 per cent in last financial year and in the auto sector only SUV segment has grown, while demand for commercial vehicles and tractors is flat and small cars have seen de-growth. Two-wheelers sales grew in FY24 but volumes are much lower than in the past.

Related Posts

Reader / Viewer discretion and disclaimer :
The information provided on SME e-News (www.smeenews.com) website is intended for general informational purposes only. While we strive to provide accurate and up-to-date information, we cannot guarantee the accuracy, completeness, or reliability of the content. The views and opinions expressed in the articles and posts on this website are those of the authors and do not necessarily reflect the official policy or position of SME-e-News website. Readers are advised to independently verify any information found on this website before making decisions based on it. We do not endorse, represent, or warrant the accuracy or reliability of any third-party content linked on this site. Furthermore, SME e-News (www.smeenews.com) website shall not be held liable for any errors, omissions, or delays in the information provided, nor for any losses, injuries, or damages arising from its display or use. Please note that the content on SME e-News (www.smeenews.com) website may be subject to change without notice.