Rated Indian companies are expected to invest between $45-50 billion annually over the next one to two years, according to a report by Moody's Ratings on Tuesday. T
he increase in capital expenditure (capex) is driven by efforts to boost capacity, with Reliance Industries, the country's most valued firm, accounting for 30% of the total spending.
Moody's highlighted that the focus on vertical integration and achieving net zero targets will keep capex elevated. "Rated Indian companies' capex will remain elevated at around $45-50 billion annually over the next one to two years. Reliance Industries, with an annual capex budget of around $15 billion across its various business segments, will account for approximately 30% of the portfolio capex," Moody's stated.
The report also noted that the oil and gas sector, along with Reliance Industries, will collectively represent over 60% of the rated Indian portfolio's expenditure in the coming years. Seven rated oil and gas companies in India will contribute around 30% of the total capex, with an expected $15 billion annual spend aimed at expanding existing capacity and investing in green energy to mitigate carbon transition risks.
Among these, Oil and Natural Gas Corporation Ltd. (Baa3 stable) and Indian Oil will allocate $6 billion and $4 billion, respectively, each year for the next two years. Their investments will focus on reserves addition, downstream integration, and energy transition, Moody's added.
Despite the substantial capital outlays, Moody's expects the leverage of Indian corporates to remain low, supported by strong earnings and consumption growth. The report also noted that credit quality for companies in India and Indonesia will stay robust.
India and Indonesia, the two largest emerging market economies in Asia excluding China, lead the region in the number of rated companies and the volume of rated debt. Moody's projects India's GDP to grow by over 6% in the next two years, driven primarily by domestic demand.
Moody's further emphasised that India's large domestic market, coupled with sustained government spending on infrastructure, will continue to shield rated companies from external shocks and stimulate business activities across key industrial sectors. The diversified nature of India's economy across services and manufacturing, along with its significant domestic consumption, is expected to insulate the country from fluctuations in external demand.
Earnings for rated Indian companies are anticipated to grow by 5% over the next two years, benefiting from broad-based growth across various sectors, including metals, mining, steel, telecommunications, and automobiles, according to Moody's Ratings.
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