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Banks seeing private capex revival aided by infra and PLI projects


Banks are seeing early signs of private capital expenditure growth fuelled by large infrastructure projects, the production-linked incentive (PLI) scheme and higher utilisation of working capital loans, an indicator of sustained revival. Banks say, unlike the past few years, loans to industry could even surpass retail loans.

“I believe there are very visible green shoots, there is appetite for borrowing from corporates, the PLI projects are coming to the financing stage and since there was a hiatus of almost four years on the capex cycle there has to be some investments,” said Samuel Joseph, deputy managing director,

.
chairman Dinesh Khara in May said that the country’s largest lender has visibility on ₹4.6 lakh crore of loans in the corporate segment. “We are hopeful that in the coming days, the environment would be conducive to corporate credit growth,” he said.

Cos Betting on Expansion

“We have already sanctioned for ports and airports and are going to finance a lot of infrastructure-related activities,” Khara said.

Loans to industry were up 8.1% year-on-year to Rs 31.5 lakh crore in the year to April 22, according to the Reserve Bank of India (RBI), the highest growth rate in the past seven years. This is after companies have deleveraged themselves and repaid loans. Utilisation of existing sanction limits and re-leveraging in a few sectors had led to industrial credit of about Rs 29 lakh crore through the past three years as per an analysis by

.

The RBI had also noted the revival of private capital expenditure in its last monetary policy statement.

“Investment activity is gaining momentum with higher capacity utilisation and capital goods production registering an uptick,” central bank governor Shaktikanta Das had said.

Capacity utilisation, which has crossed the 70% mark, is expected to get a renewed boost with the Rs 7.5 lakh crore infrastructure capex push by the government in the FY23 budget.

“We are betting big on road projects, we believe renewable energy, warehousing, data centres are very good prospects,” said Sanjiv Chadha, MD,

.

Companies are ready to borrow to invest as they bet on growth.

“We believe India Inc, after undergoing a phase of deleveraging over the past few years, is now better positioned to embark on re-leveraging,” said Kunal Shah, senior vice president, ICICI Securities. “We believe revival in consumer demand, rise in private capex followed by rise in government spending can be potential triggers for industry credit growth and these could turn out to be key catalysts for overall credit growth revival.”

Certain industries are seeing greater demand, bankers said.

“Sectors like chemicals, automobiles (EV), solar power, white goods, pharma, telecom equipment and food processing are witnessing traction for new investments,” said Murali Ramakrishnan, MD,

. “On the other hand, uncertainty due to current geopolitical tension, input cost pressure and increasing trend in cost of borrowing are challenges for sustained uptick in capex cycle.”



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