India Inc's Private Capex Dream Remains Unfulfilled As Large Firms Continue To Hoard Cash

As private companies fail to deliver on the promise of capital expenditure, an NDTV Profit analysis dives into the financials to explore where the cash flowed, and what aided the topline growth.

As private companies fail to deliver on the promise of capital expenditure, an NDTV Profit analysis dives into the financials to explore where the cash flowed, and what aided the topline growth.

Capital expenditure has been the key focus leading equity markets higher, driven by a flurry of order wins, though primarily led by government-owned companies. Despite this, the trend has been absent among privately-owned companies.

With government led capital expenditure showing a noticeable slowdown in fiscal 2025 so far—leading to a cooldown in the rally in Indian equities—investors have been waiting for the trend to pick up on the private sector side.

Privately-owned companies have been waiting on the sidelines for a supportive macroeconomic environment with a revival in demand scenario, as well as lower lending rates.

A revival in demand would support the financial growth of the companies, which is likely to be impacted once capital expenditure in undertaken. However, this revival has been lackluster as rural demand recovery remains slow, and urban demand diminishes.

Meanwhile, benchmark repo rate, which has been keep unchanged for the eleventh time in a row in the December monetary policy meeting, has been due for a cut, in order to follow suit with the global peers. Many central banks across the globe have already begun cutting rates, taking cue from US Federal Reserve in September.

A key ingredient remains the cash balances held by Nifty 50 companies, excluding financial firms, who have already declared an intent to undertake capital expenditure, but have not done so.

Cash balance of Nifty 50 companies, excluding those in the financial services sector, summed up to Rs 2.72 lakh crore, as on Sept. 30. Though substantial, the figure has remained unchanged against the year ago period.

Over this period, revenues of the 39 companies in NSE's flagship index have moved up by 5.18% to hit Rs 30 lakh crore during the first half of the current fiscal. Notably, when revenue from only operational activities was compared, it grew slower at 4.9%.

The difference is made up for by other income, which grew noticeably faster at 14%. This income originates from activities that are not tied to the core operations of the business, such as sale of an asset, or proceeds from investments made into financial instruments.

Among the Nifty 50 (excluding financials) companies, those in the oil, gas, and consumable fuels sector are currently holding the largest balance of cash at Rs 1.15 lakh crore, followed by IT companies at Rs 53,900 crore.

The largest growth in cash balances against the year-ago period was recorded by companies in the fast-moving consumer goods space, at 87%.

Other income most noticeably grew among healthcare companies at 74%, faster than the growth in their revenue from operations at 13.3%.