The India Opportunity: Why This Capex Cycle Is Superior Than 2003-08
Sanjeev Sharma and Madhusudan Kela explain what will drive India's multi-decadal capex cycle.
The current capital expenditure is more broad-based than the 2003–08 cycle, which is seeing increased participation by the small and medium enterprises in tier-2 and tier-3 cities, according to Sanjeev Sharma, managing director of ABB India Ltd.
Investments are focused in 23–24 market segments in comparison to a narrower four–five core sectors in the 2003–08 cycle, Sharma said during a panel discussion on Capitalising On Capex Cycle at BQ Prime's The India Opportunity summit in Mumbai on July 13.
Current Capex Cycle Vs 2003–08
The ongoing capex cycle is "qualitatively better" than the cycle seen in the early 2000s, MK Ventures Managing Director Madhusudan Kela said.
He underscored that there was still a "long way to go" to hit the peak of the current cycle, with the market depreciation currently standing at 1.6% as compared to the previous cycle's peak of 7.5%.
The 2003–08 cycle had high exuberance with easy lending norms and high capital availability, which would eventually lead to non-performing assets shooting up after 2010. In comparison, the balance sheets now have "improved meaningfully" especially for corporates and banks, according to Kela.
At its peak, the debt-equity in the earlier cycle stood at 85% in comparison to the current 54%, Kela said. He underscored that "borrowers have become far more responsible" and corporates now preferred to go debt-free.
In the current cycle, the distribution of investment is across the geography of India in tier-1, tier-2 and tier-3 cities, said Sanjeev Sharma, managing director of ABB India Ltd.
Sectors In Focus This Cycle
Kela said new sectors are causing a "disruption" and clean energy was now the reality. Sharma pointed out that half of the cash flows of oil and gas majors globally were allocated for transition to clean energy.
Domestically, Indian energy companies have also set ambitious targets for energy transition and this sector will likely be in focus in the current capex drive, they said.
Sharma claimed that about 70% of the buildings that would exist in 2030 were yet to be built, presenting huge opportunities in retail and commercial buildings to employ automation and sensorisation, which would result in increased energy efficiency. "Apart from clean energy, energy efficiency is also a big theme."
Data centres are also scaling up and are set to grow exponentially. In 2022, 650 megawatts of new centres were set up and by 2030, there may be a $23-billion investment in data centres alone. It may end up being a major player in the real-estate space, according to Sharma.
He said the value chain was spreading into the manufacturing sector, as SMEs substitute imported machines by assembling them domestically, according to Sharma. He underlined that tier-2 and tier-3 cities were turning out to be attractive low-cost locations for the SMEs to grow along the value chain.
Kela pointed out that the transport sector was also attracting huge investments, particularly in roads, railways and the aviation sector. Sharma said the railways was "just getting started" as it attracts the best of global and domestic players, and technology.
Watch the full panel discussion here:
Edited Excerpts From The Interview:
Madhu, I want to start with you first, how do you see this capex cycle and is it similar to the 2003-2008 cycle?
Madhusudan Kela: I would say this cycle will surely be better than what we experienced between 2003 and 2008 and I would emphasise that qualitatively, this cycle will be better.
Going by the history, if you saw the kind of capex which was being funded, there was clearly exuberance at that time, the lending was very easy, capital availability was phenomenal, and the capital markets were doing well, and you have seen what kind of NPS happened post that capex cycle between 2013-14 right up to 2018- 2019.
So, even though quantitatively you could relate, qualitatively this capex cycle will be far superior and there is data point. If you look at any capex cycle, actually requires four Cs. First, capacity utilisation, second, cost of capital, third, capital availability and fourth, confidence.
If you look at it, India has done remarkably well in the last four-five years to get all of this data together. I feel very optimistic and this time around there are stark differences between the capex cycle this time, and the one which you are alluding to like at that time, private sector, effectively, were leading 70% of the capex at that time happened from private sector, and 30% was government. This time around it is exactly the opposite, 70% is contributed by the government and the private sector is still lagging.
Let me give you one data point, the best way to look at it, you know the capex cycle is what is the depreciation to your overall asset, so that is still 1.6% the depreciation being provided. In the peak it was 7.5%, there's still a long way I am very sure. The private sector capex in times to come will start to reflect the solidarity which I am talking about.
Sanjeev, are you seeing that pick-up in capex coming in especially from the private sector as Madhu said?
Sanjeev Sharma: I agree with Madhu, 20 years back the capex cycle that we had, it had very different constructs, both globally as well as what happened in India. But right now, if you see the conditions that existed at that time, they are absolutely different, both geographically, also what's happening in India.
Now India. If you really see the markets, earlier than 20 years back, there would be only four or five segments we used to drive the capex, and that too in very large projects, and as Madhu mentioned that you know, those used to go in power, steel and some large core sector projects and they resulted in NPAs later on.
But now you know, we are looking at from our perspective, we are looking at about 23-24 market segments, which are very wide and deep across the geography of the country and some of them are the companies which are listed but a lot of businesses are happening in the private side, and they need not be very large, but they are the size, the number is quite high. So, you can see the distribution of investment is across the geography in tier-I, tier-II tier-III cities.
If you look at the players who are involved in the capex, is there a differentiation in terms of the capex been brought down by the players vis-a-vis what we saw in 2003-2008? What kind of players are now looking at capex?
Sanjeev Sharma: So, the construct has changed as we said, see, in 2003 around that time, you will see we had the 3G launched, and everybody was talking about a killer application they require on the phone before 3G can be relevant for the people, everybody was very excited.
But that means that time that digital era was not there. We never used to talk about large data centres at that time, because Google and Facebook types of services, they were just forming, and internet was in a nascent state.
Now what you can see is the data centre, for example, globally, as well in India, is scaling up. So that's a new segment in itself and last in 2022 I think we have to put together data centres worth close to 650 megawatts. You put another one year; it becomes 1300 megawatts.
So that's a kind of a multiplier effect you have and if you take it forward 2030 you will have $23 billion invested only in the data centre as an investment space and that's what is the biggest real estate game in the town. So that's one construct and there are many other segments as well.
Madhu, do you agree the construct of the capex and the players have changed, and the sectors have changed? Is it sustainable?
Madhusudan Kela: Clearly, that is what I was mentioning last time, maybe the private sector was leading, and within the private sector 60% of the capex were done by the top 10 corporate houses. But if you see today that number is maybe like 35%, which is constituted by top 10 corporate players.
Also, there are a lot of new sectors which have come up and also it is happening because of disruption. Take for instance clean energy were only words 20 years back. Today, clean energy is a reality. The fact that we face such enormous heat in this season itself is clearly indicating what is the time to come. What kind of global warming we are going to have?
The clean energy now you and I can't even estimate what kind of capex will be required, but what we are able to see in the ground, right, everyone, and these are all power plants when we were doing in the last cycle a power plant took six-seven years because we were doing a thermal. Today, you can make a power plant in six months, like if you do solar or if you do wind, you can actually start producing power in six months.
So, as Mr. Sharma spoke about data centers, I think that capex is extremely broad based, and it is also happening because of the disruption, which is happening around the world, specifically in India.
Sanjeev, energy transition capex is going to be the bigger play going forward?
Sanjeev Sharma: It is, since you started the premise of comparing 20 years back so what was happening 20 years back was in Qatar, massive capacity for gas was being put in place. U.A.E., Saudi Arabia and you go to different parts of the world, lot of investments were taking in the oil and gas project and that time about $9 trillion, and you had that as the energy play at that time.
Now the same companies, the large oil and gas companies because of this climate action and the sustainability demanded by the investors, the core of their strategy is energy transition. So whatever cash flows they are generating, half of it gets allocated for maintaining the assets they have in the fossil fuel side, and rest of it gets allocated on the energy transition.
So, we want to move away from the fossil side. Want to get into the renewables side which could be generating energy with wind, solar and also getting into the electric vehicle space so that they want to make sure they are the drivers in the energy transition, and these are large companies and they have a lot of cash flows, because the fossil fuels is still generating a lot of cash flows and those are getting transmitted into the energy transition space.
Are you seeing the cash flows getting used for energy transition in India as well in that sense?
Sanjeev Sharma: Clearly, you can see the largest players in the oil and gas space, they have declared very large ambitions on the renewable side so that speaks for it.
Madhu, tell me opportunities which are there to play in this capex cycle and how you play that opportunity?
Madhusudan Kela: It is a buffer out there, you have to choose as my guru and mentor used to tell, you eat whatever you can digest, and just remember, don't overeat it. I think there are a plethora of ways by which you can play this.
My favourite theme is obviously the infrastructure side of capex and also this China plus one. Now, given that PLI in my opinion, when we talk maybe 10-15 years down the line, would have been the biggest game changer for India. What people not realising by giving maybe Rs 3 lakh crore of PLI incentive spread over 14-15 sectors, the government will generate Rs 60 lakh crore of revenue in this time.
If you calculate GST on that Rs 60 lakh crore, whatever number which you want to assume, it will be multiples of what they actually be able to give, forget the income tax, forget the benefit which you will get by job creation and this will enable that a lot of industries which are kind of uncompetitive in India, let's say, mobile manufacturing you know, in the earlier panel, it was being spoken. Ebitda margin, typically for a mobile manufacturer in China is 3%. Here if you are going for a 5% incentive on the topline, of course, I will be competitive.
This PLI change itself is going to be a big thing to watch for manufacturing, which is specifically China plus one and infrastructure level topics.
How do you look at the companies going for capex from a balance sheet point of view. If I were to compare from 2003-2008 period to now, how are Indian companies placed with respect to balance sheet?
Madhusudan Kela: Phenomenally well, again, taking a data point, the peak of debt to equity, I am saying 2010 something it was 85%. Today, that number is 54%.
So, corporate in India when we are also talking to people across what we see through our investment. Corporates in India significantly deliver…, and borrowers have become far more responsible. What I have seen in my career, even when I go to Delhi and meet real estate players, they also want to be debt free.
Obviously corporate balance sheets have improved very, very meaningfully in the last 10 years. The banking balance sheets have improved. When did you hear of a public sector bank that provided 75% of their gross NPL as provision coverage. I have never seen these numbers in my career. For both banks, households, as well in the corporate balance sheet, are in a far better shape according to me, than it had ever been, forget the last cycle.
Sanjeev, do you concur that balance sheet is not an issue at this point in time, and it's more the direction in which they want to put the capex?
Sanjeev Sharma: Yes, I think that's true because it also reflects in your receivables, earlier the receivable cycles used to be very long, whether now it's a small player or is a medium sized player or large player. When you deliver your services and products you get paid on time. So that shows in your cash flows and the receivables cycles.
Madhusudan Kela: For a change even, the government is paying on time.
Sanjeev Sharma: Absolutely.
You see a lot of small and medium enterprises now are getting involved in this kind of capex?
Sanjeev Sharma: You should know that underlying there are two types of capex which is visible. One is wherein some integration takes place. But then you have a lot of value chain providers who provide the machinery and equipment for these things.
Earlier, what used to happen many years ago, a lot of stuff used to get imported as a full machine. Now what you have is that our entrepreneurs in the tier-II or tier-III cities, they absorbed those technologies, and they have a capacity and capabilities with the younger generation to put those things together and also put quite a bit of digitalisation on it.
So, quite a few sophisticated machines are now built here which used to be imported. Quite a bit of the value chain which was imported has spread into the manufacturing sector or in the private sector. So that again is another area where the new market has formed.
Where is this kind of innovation or this kind of expenditure happening?
Sanjeev Sharma: Yes, I think cities like Mumbai, Chennai, you do have large corporates who do the capital allocation into large plants, but then it makes sense to be present in tier-II, tier-III cities because the cost of land, cost of setting it up, cost of what you pay to the labour, costs of what you pay to the white-collar job is much more competitive in those areas.
So, people are smart, I think that's how they're setting themselves up and more people who have good corporate experiences have started their own jobs. People are doing integration jobs, which used to be earlier when you had to get the experts from overseas. So, all that is value added is getting done inside the country.
Are you seeing larger players moving to these cities because of the costs involved, to reduce the costs and get more productivity?
Sanjeev Sharma: Larger players always move where the raw materials were there. So, you may have an office in a large city, but you always go where it's easy to bring the raw materials and also easy to send those finished goods out and you have access to the labour, so I think that keeps happening.
Madhu, we have seen a huge capex coming into the transportation sector. How do you see this picking up and the kind of opportunity that exists for investors in this sector?
Madhusudan Kela: So, even within transportation, the three sectors which are doing exceedingly well compared to past one is road. Second is railways, where there is a massive increase which we have seen in the last few years in the railway budget, the kind of spending which is happening and third is aviation.
Last week only I was reading the number, I didn't understand what kind of jump we are talking about, the number of planes which will be required, the number of airports which will be required, the number of passengers which will travel is just spreadsheet right now, but it looks with the economy it will grow.
I would like to talk more empathetically about railways. The remarkable changes when you were saying, I couldn't believe I felt so proud as an Indian travelling in the Vande Bharat train, we went from here to Surat, absolutely neat and clean, phenomenal service, very good bathrooms, I could not imagine that it is Indian Railways, and we are talking about that they will been rolling out over 2000 over the next 10-12 years. As for the amount of money which will be required to do this, you will see massive amounts of capex, even within railways, happen.
As a sector that you are very well in, how do you see that capex translating into opportunities?
Sanjeev Sharma: I think railways are getting started now because of their ability to absorb new technology and willingness to absorb new technology and experiment with new technology. I think that has given me a lot of confidence, not only in them, but also all the partners in the private sector supporting them and they are giving them a lot of kind of flexibility to participate in building the railway network.
Be it moving away from diesel locomotives to complete electrification, so that itself has been quite a large capex by railways. Then putting new trains on it, then the freight corridors. So, you can see that the backbone of India is being rebuilt in terms of how the freight will move in future and also how people will move from the shorter distances, where the planes are not so efficient to fly.
So, I think that journey has started and that confidence in, without importing technology, putting it together here and attracting the best of global technology and using the best of local players to put them together is happening and we are seeing those numbers in our books, and you can see that the diesel side of the business that has gone down, but on the electrification side, it has gone up.
I was about to come to the electrification journey taking place in the transportation sector, do you think is a huge one, finally moving to passenger cars as well?
Sanjeev Sharma: So, I think electrification journey as I said, if you are in Europe, central Europe, by default, people take train to travel four or five-hours distance. So, I think this railway is the new railway set, as Madhu said about Vande Bharat, people will take the short distances by these trains as you put four-five years and more trains on it, and then longer distances will be the place.
Now when it comes to electrification and the EV side of it, that's another story which is developing. You can very clearly see that the on the two-wheeler side that transition has taken quite quickly. The three-wheeler side also I think quite a good movement is there and especially when you have the fleets wherein you have, say, the cars which are provided as taxi service, I think there again the pickup is very good.
Like you have a service in New Delhi called Blue Smart which is dedicated as an EV player, and they offer very good services, and they are ramping up. When it comes to passenger cars, I think that will require public infrastructure to do the charging, we are in that charging space, we can see movement is taking place there, but I think it will be a journey to be done in that area.
What kind of opportunity do you see in that electrification journey?
Madhusudan Kela: It is not yet begun. I think the amount of cumbersome vehicles which need to be replaced by electric vehicles and as if it again comes to that point of carbon neutrality, it's not a choice anymore. It's by compulsion that you have to do it, or it will get done.
So, if you feel you see yourself and you even move in a city like Mumbai, how many cars can you identify which are electric vehicles and how many cars are the older commercial vehicles. The answer is in front of you that I can't even identify one car out of 100 which are like electric vehicles.
You go to any smaller city, it is just beginning, really long way to go and they will have various ways to play it in the stock market and a lot of listed companies which are there right now. But I am sure a lot of companies which are either ancillary or into battery or into electric vehicle. There a lot of variety of companies will come.
You spoke about the battery and the new data centres as a new area. Battery storage is something which is emerging, how big of an opportunity is it?
Sanjeev Sharma: So, one has to before we size-up an opportunity, you would have to look into the underlying trend, which I think is being driven in India and by the Indian government.
We want to move away from fossil fuels, that's the underlying trend because 85% of fossil fuels are imported and we don't want to keep shipping money to other countries to import our energy. So, I think that one energy transition is at the core of whatever is happening in this space.
So, whatever is happening is that renewable energy, I think we have made quite a leap in that area, especially in solar energy, followed by wind and hydel and now the hydrogen is on the experimental stage. If you really successfully execute over a period of time your dependence on fossil fuel goes.
Railways are moving away from diesel engines and having electric locos and electrification all across, again going in that direction. So electric vehicles are again part of the same equation. Now when it comes to batteries, renewables are available, solar especially during the day. So, what you need to do over a period and not only provide batteries in the EV vehicles, but also spread those batteries across the grid. So that when the renewables are generating energy, you are able to store that energy for the night and you put it into the grid if there is a deficiency of the power, these batteries can back them up.
So, it's not only the EV side, but also the battery storage is going to be a big segment and quite a significant segment in future. So different components will play for the energy security you will have solar, wind, hydro, then you have you know, the battery storage and hydrogen they will play a mix so that they can have a significant impact on dampening down the fossil fuel and also same thing is connected into the sustainability strategy, and the commitments we have made to reduce the GHG emissions in the country.
Are you seeing an ecosystem getting built or is it still on a nascent stage?
Sanjeev Sharma: Some of them are at a good maturity curve and many technologies are being experimented across the globe. So, you should know not everything has been solved even in the West, who are far ahead of us in experimenting, not everything has been resolved.
It will be a period of transition and I think one should recognise it. One should not kind of have a knee jerk reaction. Some countries in Europe have done that because they move too quickly for energy transition, especially when the gas supplies stopped out of Russia into Europe. You can see some of them have been exposed because their energy transition was not so well handled.
So, I think India will do well to really take a period of time and really find its feet firmly on the ground and have this transition take place for the society. So, it will be good in terms of what kind of foreign exchange we spend, and also it will be good that will be more self-sufficient in creating our energy security.
Madhusudan Kela: If I may add, sometimes being slow and being late also helps.
Sanjeev, household infra spending is taking a big leap, or the growth is much faster. Can you give us some idea of how it's moving and especially automation and household technology which is playing a big role in this household investment?
Sanjeev Sharma: I would say in the infrastructure space and also in the industries, one new big theme is apart from energy transition, energy efficiency is a big theme because I think one data point is that anything that we produce in this country, it uses 30% more energy relative to some other places.
So, that means the component that we use to convert the grid energy into machine energy, I think we are not using efficient components. So that's one large space, how the energy efficient motors, the drives and also the automation of the buildings that we do.
You should know that about 70% of the buildings which exist in 2030 are yet to be built. So, if you continue to build the buildings the way you are today, potentially you will use more energy. But if you use automation and do a lot of sensitisations in that building, one is, it will be much better for humans, but at the same time, it can consume 30% less energy. So that's another area of transition which is happening on the commercial side of the buildings as well as on the residential side of the buildings.
Madhu, what kind of multiplier effect can it have?
Madhusudan Kela: You can see the multiplier, whether you see the demand of steel, and you will see the demand of cement or you will see the demand in the digital side, I think that is very, very clearly visible because the capex in that sense is the biggest multiplier for the economy.
So, when you build a road, you just don't build the road. You consume cement, you consume steel, you employ people who in turn, go and spend. So, that I think that's how the whole economy actually gets momentum and I just like to revisit my point, that even if you are comparing yourself to 2004 and 2008-09 cycle.
We have just begun and qualitatively this cycle, in my opinion, will be far more superior than what we experienced in any cycle in India in terms of capex.
How do you see the cost of capital at this point in time as compared to 2004-2008 and, do you see that we are better placed in terms of cost of capital if we are going to improve?
Madhusudan Kela: To begin with, it looks good, because we have seen possibly worst of inflation. We have seen possibly the worst of global events also vis-a-vis inflation and our bond deals are still 7.5%.
If you see what happened after 2008, they went berserk when inflation went berserk. So, in the beginning of the cycle itself, we are seeing they would be interested, might have been peaked out or 25 basis here and there.
The second is weighted average cost of capital, which you will see weighted average cost of capital is cheaper as compared with the last cycles also because obviously the equity valuations are clearly more expensive than what they were in the last cycle. But I think considering that the capacity utilisation in a lot of industries is at 75-80-85%, 0.25% interest rate will not matter here or there. But I think availability of capital and the cost of capital both are favourable for a capex cycle.
Capital is much more available now?
Madhusudan Kela: Of course, from multiple sources.
Do you see that in the boardroom, do you see more discussion on the quality of capex and the returns now as compared to earlier?
Sanjeev Sharma: I think as Madhu said there is much more responsibility in terms of how the capital is being deployed and also there's a lot of pretesting done before the capital is being deployed, whether you are going to really make it in that project. So, there's much more safeguards.
Now when it comes to the companies, it is very clear that you know our balance sheets are good. Lot of companies are debt free. They have good cash on the balance sheet now. What they will do now as the capacity utilisation goes up given the economy's doing well, one is that you will have the organic expansion of factories as well as more money spent on the productivity measures on the existing factories will take place, plus when the consolidation takes place in certain market segments and certain product segments, naturally, you can utilise capital to bring more, the inorganic, inputs to your portfolio by bolting on a new technology.
It could come from startups; it could come from some other companies who can add value. So, that's what the discussions are at the board level on how to use capital in India.
Do you see a redefining capacity supply chains because those are some of the keywords today used in all boardrooms, especially global supply chains, is getting reorganised in a way through this capex?
Sanjeev Sharma: It is I think, given what has happened in recent past 20 years, I think everything was going in one direction, one country stepped up and kind of really became the supply chain or supply chain supplier of the world.
But now, I think it's on the reverse cycle, everybody is onshoring, and everybody is doing friendly shoring. So, in that sense, you got to be friends with the large markets and if you do that, then naturally you get a lot of benefit from the supply chain as being built into your own shores.
How did that translate into economic gains. We are a $3 trillion economy, by 2030 is there a roadmap for us to reach $7 trillion through this capex cycle?
Madhusudan Kela: I think so. We have been all India bulls, very, very bullish on the economy as well as on the markets over a period of time. So, I think whether it reaches there in 2030 or ‘31 or maybe 2029, we don't know, but clearly, we are heading in that direction whether one year here or there.
Let me put it, everyone is very bullish and from my mind, more bullish than we have ever been. But let's not forget, you know, when you are investing in the market, make sure that you are doing your homework properly, because we are all talking from a 3-5-10-year perspective. Markets open up every day for six hours and there are fluctuations and there is volatility, right. You need to be cognizant as of what you are paying and what you are buying.
One thing which I don't agree with is that there are so many opportunities that you to go and buy anything. You will make money, you might make money, but you might not make optical money, which is there in the market. I think I can see clearly there's some exuberance which is there in some pockets including some new things which are even related to capex. What I am trying to say is if you have a 10-year horizon, then you possibly can ignore it but most people may not have a 10-year horizon. So, you possibly need to make sure that if you are a professional investor, don't just go by market, don't have that left out feeling that if I don't buy this today, things will run out.
You know, the markets always give a chance. It is very, very important than ever before, to be disciplined. You should be fully invested. You should be buying companies, but you shouldn't be very disciplined about what you're buying, and what kind of work you are doing.
Sanjeev, is this going to be four-to-five-year cycle or is it a much more sustained and long-term cycle?
Sanjeev Sharma: I believe the components which are playing out are multi-decadal cycle, so it's not a five-year cycle, seven-year cycle. So, you should look at this as a 10-20-30 year cycle. I think if you're on a relative scale on the GDP comparison, you see we are 15 years behind China for given the decision making that were prevalent at that time in China, maybe you should give another discount of five years.
So you say we are 20 years behind where they were and I think if we continue to execute, continue to kind of invest capital at scale and at the same time, bring new technology, adapt new technology, new productivity measures, and continue to have these larger themes like energy transition, manufacturing, going for scale in the area, which really matters to the world as well as to your own energy as well as electronic security for the future. I think we play that and keep stable policy around it and incentive. I think it's a multi-decadal cycle in my view.
Madhusudan Kela: That is the headline for the show.
Audience: Madhu sir, from your last comment about some of the pockets where there is an exuberance in terms of capex cycle as per your view, which are the sectors which you feel where conditions of oversupply can come soon?
Madhusudan Kela: I would not like to name a particular sector, because I am saying that even within sectors which are doing well, there is a possibility that there might be a little bit of exuberance in where the markets are. That there is a possibility that exuberance may develop.
So, what do you do? Do you stay away from the whole market and say no, you must be fully invested even in this market. Maybe today, for instance, large caps are offering a better opportunity than some of the small and mid-cap peers up there. If you just look at the share valuation and the growth opportunity and the risk reward, some of the large-cap companies might be more favourably placed in the same sector.
We have seen in the past also, the real returns are made not only by identifying a sector but actually buying the right company within the sector. So, I am just saying as the market goes to newer highs, and this is happening like every day, we should not just say India story is phenomenal and just go and buy anything and I can make the kinds of returns which I made in the last two or three years. That would be an unreasonable approach.
Audience: you have talked about railway capex, the road capex, roads being built, but on the other side, we have incidents like rail tragedy happening very recently, where even the basic security systems were not in place. Do you see this as a risk in future because the foundation is not in place?
Sanjeev Sharma: Well, infrastructure is the arteries and veins of any economy. So that has to be in place. So, there's no doubt about it. But at the same time, let me is quote it with my experience, I used to work quite a bit in Southeast Asia, Japan, and China and I take myself back in 1999 in China, you know, if you go to cities, which are really booming now, there used to be nothing, right. But then what happens is over time they build themselves up.
Right now, India has a tendency to struggle with something for a period of time and then it takes off. If you go in mid 90s, we used to struggle with our airports. You know, we never thought that we would build good airports and we would have a meaningful infrastructure but once they built one airport with the private participation, we got the model right and it started scaling up inside the country.
20 years back we did the metro in New Delhi. Now there are 18 cities which are building metros to move people around. Now the same thing, if you really look into the railways, I think modernisation is taking place. Central government has figured out how to get the land acquisition and make these expressways which are of the same standard as you find in Europe, in terms of how the building is being done and, in some cases, even better and it's a pleasure to be on there. But still, it is at the starting time.
But when it comes to the city infrastructure, I think it has developed themselves organically. Probably nothing against Mumbai or Chennai or Bangalore, I think maybe we have enough land in this country, we should build some new cities with better infrastructure and allow people from small towns to migrate there and find work close to their home towns rather than everybody has to move to larger cities.
And I believe with this interconnectivity of railways, highways taking place probably the pressure should be less on these large cities and the Indian economy should grow in the midpoints and the on the tier-II, tier-III cities are today and become much larger in future and I think in China, if you see that's what happened. There are a lot of large-sized cities which came up, which were not there 20-25 years.
Madhu, you want to conclude?
Madhusudan Kela: I just want to say that in a country which is 142 crore people, in such a vast country, if you just want to pick up a few instances and make a case that is not the right way to look at it, if you attempt to do ten things, any human being or any government, there will be one or two things which will be missing.
Just to directly answer his question. I don't think that we need to slow down, and we need to moderate, rather we need to accelerate because of the same reasons that he mentioned that if there are still accidents happening, then we need to possibly upgrade our railway systems much faster than what we have done in the past.
So, I will say that just to conclude on this session that we are at the cusp of, as Mr. Sharma rightly said, in multi-decadal opportunities even in the capex sector, aided by absolutely right policy by the government which we spoke, one such initiatives as PLI and India manufacturing. So, this opportunity is here, and it is just building.
