Thread by @MultipieSocial

Are we back to where we were in 2003 and nearing a Capex cycle?

A data thread🧵
1/n

In Budget 2022, the Finance minister allocated the highest ever expenditure towards:
1. Infrastructure (Roads, Highways etc.) and
2. Manufacturing in the form of PLI schemes to boost scale in industries & gain competitive advantage in global supply chains.
2/n

From 2006-2012 commodity prices were on uptrend with increased leverage & participation of the private sector was also high.

But between 2013-2020, we saw commodity prices going down with private sector participation declining.
3/n

Currently, the Investment cycle indicates revival due to many reasons like deleverage trend, early signs of commodity prices surging & demand-led Inflation which is expected to drive utilization & Capex (more brownfield).
4/n

Post-covid-recovery, due to pent up demand, the contribution of manufacturing has been increasing consistently and it constituted ~80% of the total investment done in June FY22 and the new orders in Q4FY21 were higher than the pre-covid average.
5/n

The 4 month Capex from Apr-Jul’21 incurred by the Central Government is Rs 1.28 lakh crs and this 4-month figure is the highest in the last 7 years.

This is broadly led by construction segments like roads, railways and water where Road contributes +35% of the current Capex.
6/n

New project announcements reached at pre-covid levels i.e. ~2 lakh crs in June’21 which dipped to 0.5 lakh crs in June’20.
7/n

As more Capex announcements are declared, we can see bank credit to the infrastructure sector is increasing. In July 2021, the incremental credit growth was ~30% towards road infra compared to July 2020.
8/n

Global companies like Siemens & ABB are also optimistic on demand trends in India.
9/n

Metals (1.64 Lakh crs), Oil & Gas: (1.04 lakh crs), renewable power (0.75 lakh crs) are the top sectors that have announced the highest Capex plans.
10/n

Orderbook of Capital goods is picking up since march’20 and large EPC companies like L&T are also seeing revenue and order book growth.
11/n

Cement players have announced large project announcements (majorly from large players) of ~0.21 lakh crs

Top companies in cement & steel are close to peak utilizations.
12/n

In Q1FY22, Real estate sales are more than the total launches i.e. inventory is at the lowest compared to the last 3 years and the market share of top players is improving significantly.
13/n

After 2 last decades, finally, we are seeing signs of the overall Capex cycle (capital formation) improving in India (after the downcycle seen in the last decade) with PSU’s contributing along with private sector companies.
14/n end