India Inc's capex tops Rs 1 trillion

Reliance, NTPC, Bharti, ONGC, Essar Steel top 5 asset builders in 2005-06.

Evidence that the economy is on a roll is getting stronger. India Inc's capital expenditure touched a new high with manufacturing and services companies spending Rs 1,10,000 crore in 2005-06.

This is 29 per cent (Rs 24,608 crore) higher than the Rs 84,685 crore spent on expansion in 2004-05.

What is more, over half the total capex, or 52 per cent, was spent on plant and machinery. Of the rest, 26.5 per cent was spent on capital work in progress and 21.5 per cent on other fixed assets, such as land and buildings.

"This kind of spending on capital expansion has not been seen in recent times. It has been growing in tandem with growth in corporate earnings and this will increase further as some large companies are now eyeing overseas expansion," said the chief financial officer of a manufacturing company.

The 1,425 firms studied by the BS Research Bureau aggregated gross fixed assets of Rs 7,67,104 crore last year, up 11.7 per cent from 2004-05. The capital spent on work in progress was up 32.2 per cent to Rs 118,497 crore.

Just 25 firms accounted for over 53 per cent spending on fixed assets and the top 100 companies' share is 80 per cent.

Reliance Industries (Rs 9,427 crore), NTPC (Rs 6,696 crore), Bharti Airtel (Rs 5,252 crore), ONGC (Rs 4,630 crore) and Essar Steel (Rs 4,630 crore) were the top five asset builders in 2005-06.

Refinery firms continued to be the largest asset builders with purchase of fixed assets worth Rs 17,626 crore in 2005-06, up 36.25 per cent. However, there was a marginal decline in the growth rate of purchases, which was 50.6 per cent in 2004-05.

While Reliance, HPCL and Mangalore Refineries stepped up their capital expenditure in 2005-06, ONGC and IOC reduced it.

The integrated steel and steel products firms collectively spent Rs 11,719 crore in 2005-06, almost double that of the previous year. Power companies were third in the list (Rs 8,016 crore), followed by telecommunications (Rs 7,376 crore), textiles (Rs 5,280 crore) and information technology (Rs 4,863 crore).

While most of the capital expansion was seen in core sectors such as steel, engineering, cement, capital goods and telecom, other sectors that have stepped up spending were sugar (Rs 1,689 crore), automobile ancillaries (Rs 2,161 crore), chemicals (Rs 1,531 crore), paper (Rs 833 crore), construction (Rs 731 crore) and tyres (Rs 704 crore).