Infrastructure may get a capex thrust
Increaseinoutlayinlinewithindustryexpectations
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.