Moody's Ratings on Tuesday (August 20, 2024) said rated Indian companies will spend $45-50 billion annually over the next 1-2 years towards capex as companies boost capacity, with the country's most valued firm Reliance Industries alone accounting for 30% of the spendings.
Investments to increase vertical integration and achieve net zero targets will also keep spending high, Moody's Ratings said in a report on corporates in India and Indonesia.
"Rated Indian companies' capex will remain elevated at around $45-50 billion annually over the next one to two years. With an annual capex budget of around $15 billion spread across its different business segments, Reliance Industries alone will account for around 30% of the portfolio capex," Moody's Ratings said.
The oil and gas sector and Reliance Industries will collectively account for over 60% of the rated Indian portfolio's spending over the next couple of years.
Moody's said the seven rated oil and gas companies in India will also account for around 30% of rated Indian companies' capex.
These companies will spend around $15 billion annually to expand existing capacity and make green energy investments to reduce carbon transition risk.
For instance, Oil and Natural Gas Corporation Ltd. (Baa3 stable) and Indian Oil will spend $6 billion and $4 billion, respectively, in each of the next two years on reserves addition, downstream integration and energy transition, Moody's added.
It also said strong earnings will continue to keep the leverage of Indian corporates low, even as companies push ahead with capital spending plans in response to consumption growth and as offshore borrowing rates remain high.
Moody's said credit quality will remain robust for companies in India and Indonesia.
India and Indonesia are the two largest emerging market economies in Asia excluding China. These two G-20 countries have the highest number of rated companies and volume of rated debt among emerging economies in the region outside of China.
India's GDP is projected to grow at over 6% over the next two years, Moody's said, adding domestic demand will be the main driving force behind India's growth.
The large proportion of domestic consumption in India has and will continue to insulate the rated companies from external shocks. In addition, as urbanisation accelerates across the country, sustained government spending on infrastructure will stimulate business activities across key industrial sectors, Moody's said.
India's economy is well diversified across services and manufacturing. India's large domestic market helps to shelter the country from fluctuations in external demand, Moody's said, adding it expects leverage for rated companies in India will remain low.
Moody's Ratings expects earnings for the rated Indian companies will grow 5% over the next couple of years. Companies will benefit from the broad-based growth across various sectors, including metals, mining and steel, telecommunications and automobile companies.
