INDIA INC. WILL NEED TO RAISE RS.47.2 LAKH CRORES TO FINANCE MEGA INFRASTRUCTURE PROJECTS BY MARCH 2019: PHD CHAMBER & CRISIL

INDIA INC. WILL NEED TO RAISE RS.47.2 LAKH CRORES TO FINANCE MEGA INFRASTRUCTURE PROJECTS BY MARCH 2019: PHD CHAMBER & CRISIL

INDIA INC. WILL NEED TO RAISE RS.47.2 LAKH CRORES TO FINANCE MEGA INFRASTRUCTURE PROJECTS BY MARCH 2019: PHD CHAMBER & CRISIL

 

No.PR-90
September 9, 2015
New Delhi

 

INDIA INC. WILL NEED TO RAISE RS.47.2 LAKH CRORES TO FINANCE MEGA INFRASTRUCTURE PROJECTS BY MARCH 2019: PHD CHAMBER & CRISIL
 

HD Chamber of Commerce and Industry and Rating Agency CRISIL have made a forecast, anticipating that India Inc. will need to raise raise Rs.47.2 lakh crores by March 2019 to finance host of its multiple mega projects in its infrastructure and other such segments.
 

This would mean Rs.9.5 lakh crore per year, or Rs.79,000 crore per month -- or Rs.2,600 crore every day through fiscal 2019.   Of the total amount, about Rs.29.5 lakh crore will be required by the infrastructure sector alone, which is tantamount to raising nearly Rs.6 lakh crore per year -- or more than Rs.1,650 crore per day through fiscal 2019. Oil & gas, metals and construction sectors will eat up Rs.17 lakh crore.
 

Clearly, both Indian and global financial markets will have to play a critical role because of the humongous funding requirements to enable Indian economy grow as intended, says the President, PHD Chamber Mr. Alok B. Shriram while releasing findings of the forecast of the Chamber and CRISIL, condensed in a paper on Financing for Growth.
 

The paper released here on Wednesday at a Summit on “Financing India’s Growth: Way Forward” under aegis of PHD Chamber of Commerce and Industry, in the presence of Dy. Governor of RBI Mr. S S Mundra; CMD EXIM Bank Mr. Yaduvendra Mathur; Dy. Managing Director (Corporate Strategy & New Business), State Bank of India Mr. Sunil Srivastava; Senior Vice President, PHD Chamber Dr. Mahesh Gupta and its Banking Committee Chairman and Co-Chairman Mr. Sanjeev Gupta and Mr. Ashish Agrawal, however, points out that of the overall financing number, corporates will be able to cobble up Rs.18 lakh crore either from fresh equity or internal accruals while the debt requirement would be to an extent of Rs.29.2 lakh crore.  The lion’s share of this, or Rs.16 lakh crore, will have to be provided by banks, added Business Head, CRISIL Ratings Mr. Raman Uberoi.
 

of the balance debt required, about Rs.8.8 lakh crore will have to come from India’s bond markets, and Rs.4.4 lakh crore from foreign currency borrowings.  The paper further adds that while banks will need to stump up gigantic amounts of capital themselves, the corporate bond market will have to innovate big time because the quality and the quantity of capital requirement is changing.  Foreign currency borrowings, on the other hand, come with currency risks, so tools to counter them need to be evolved.
 

Infrastructure sector alone would need 60% of the overall requirement from fiscals 2015 to 2019. Most of this will be taken up by the power, roads, railways and urban infrastructure sectors, which together constitute ~80% of overall infrastructure investments. This is in line with budgetary allocations, where the maximum is being made for roads, railways and urban infrastructure. For telecom, we have also included spectrum costs.
 

The paper further elaborates that corporates (ex-infrastructure) require Rs.17.7 lakh crore.   Among corporates (excluding infrastructure), the oil & gas sector is seen requiring most of the capital in the medium term, of which 80% will be incurred by upstream exploration & production (E&P) companies. Despite the fall in crude oil prices, the capex for E&P companies is expected to continue given the lower subsidy burden.
 

The PHD Chamber President Mr. Shriram while quoting from the paper also added that in metals, maximum investment is expected in the steel sector considering around 30 million tonne of capacity will be added over the medium term to the existing 100 million tonne capacity. But the pace of capex will depend on steel prices.
 

As for aluminum, capex is mostly over and the next five years would see companies focusing on stabilisation and ramping up of utilisation.
 

Investments in healthcare, hospitals & consumer goods are expected to continue at a steady pace as in the past – more so hospitals considering they are now becoming an organised sector and capacity expansions are happening at a good pace.
 

ENDS

Koteshwar Prasad Dobhal
Consultant (PR)