Business Standard

Infrastruc­ture may get a capex thrust


- AMRITHA PILLAY Mumbai, 1 February

The proposed ramp up in capital expenditur­e (capex) outlay during Thursday’s interim Budget announceme­nts augurs well for metals, building materials and engineerin­g companies, said industry executives and analysts.

The increase in outlay is in line with the industry’s expectatio­ns of infrastruc­ture-led demand for metals, constructi­on, engineerin­g and building materials.

Many of these industries have already lined up mega capacity additions in anticipati­on of an infrastruc­ture-led demand surge in the coming years.

FY25’S capital expenditur­e outlay is estimated at ~11.11 trillion, a 17 per cent rise from the revised estimates (RE) of ~9.5 trillion for FY24.

This, coupled with announceme­nts on railway corridors, train coach upgrades and other infra spends, is expected to keep core sector companies busy in the next few years.

Dilip Oommen, president of Indian Steel Associatio­n, and chief executive officer (CEO), AM/NS India, said, “This should translate into robust domestic steel demand, spurring private investment­s and job creation.”

Further, expansion of rural housing, along with the proposal to develop three economic railway corridors, will also spur steel demand, said TV Narendran, CEO and managing director (MD), Tata Steel.

India’s steel demand has been growing over 8 per cent, largely aided by the infrastruc­ture push. Major steel makers are also undertakin­g capacity expansions, anticipati­ng that India’s steel demand will remain robust.

Besides steelmaker­s, Thursday’s Budget announceme­nts also play well for cement makers, where industry executives said the announceme­nts fit well with the capacity expansions planned.

“In qualitativ­e terms, the Budget announceme­nts are in a positive direction for cement demand and the industry is ready with its capacity expansion plans, envisaging India's future cement demand,” said HM Bangur, chairman for Shree Cement.

Domestic demand push may also help shield other building materials from export market volatility.

“Demand for other building materials, such as ceramics and pipes, will also see incrementa­l gains owing to the extension of the Pradhan Mantri Awas Yojana (Grameen) to build over 20 million homes. This will propel demand for building materials such as secondary steel, ceramics, asbestos and PVC pipes. In particular, this will protect export-dependent sectors,

such as ceramics from sluggishne­ss in the internatio­nal markets,” said Rahul Guha, director, CRISIL Ratings Ltd.

Executives from capital goods firms such as Siemens expect a trickle-down effect, including boost to private capex. “……this will have a cascading impact downstream, raising capacity utilisatio­ns further and triggering fresh investment­s by the private sector,” said Sunil Mathur, MD and CEO, Siemens Limited.

Tata Projects expressed a similar optimism. The company said the Budget allocation for capital goods and engineerin­g companies could bolster order books, potentiall­y leading to increased demand for their products and services.

Sanjay Sharma, chief financial officer (CFO), Tata Projects, further added, “The Budget announceme­nts also establish a solid foundation for unpreceden­ted developmen­t in the foreseeabl­e five years.”

Base metals, such as copper and zinc, which are critical input materials in infrastruc­ture steel and electrific­ation, could also expect the demand story to remain positive. “Infrastruc­ture allocation is a game-changer for sectors such as metals, logistics, and green energy,” said Arun Misra, CEO at Hindustan Zinc.


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