Capex - On A Sustainable Upswing - HSIE-202208221711224936246 PDF

INDIA EQUITY STRATEGY
Capex: on a sustainable upswing

India Equity Strategy
India’s long-awaited Capex cycle finally seems to be gathering momentum, after a
hiatus of 10 years. While there were false starts in the last decade, we believe the
recent post-COVID pick-up is looking sustainable and drivers are in place for multi-
year growth. In this report, we have done a detailed bottom-up analysis of (a) 1,700+
government projects that are under implementation (explaining >60% of total
government Capex of FY22) and (b) Capex plans of top 400+ private sector companies
to better understand the drivers and likely shape of the Capex demand curve. The
analysis clearly highlights multiple engines of growth starting to fire together, which
would lend stability and visibility to capital outlay in the economy over FY22-26.
While to an extent the government Capex growth would remain a function of tax
collections (FY23 expected to be strong), we believe private sector Capex is on a cusp
of pick-up, aided by confluence of multiple enablers such as deleveraged corporate
balance sheets and healthy profitability, a well-capitalized banking system with NPA
cycle over, rising domestic demand as well as mid-cycle capacity utilization, and
interest rates. We remain positive on investment-led growth cycle. Our top picks
within our coverage universe to play this multi-year theme are financials (ICICI and
Axis), capital goods/infra (L&T, Siemens, Cummins, and GR Infra) and capacity
expansion-led volume growth in UltraTech, Dalmia Bharat, Navin Fluorine, Aarti
Industries, NTPC, Phoenix Mills, and Havells India.
Varun Lohchab Amit Kumar, CFA Atishray Malhan

varun.lohchab@hdfcsec.com amit.kumar1@hdfcsec.com atishray.malhan@hdfcsec.com
+91-22-6171-7334 +91-22-6171-7354 +91-22-6171-7363
22 August 2022 Strategy

Capex: on a sustainable upswing
India’s long-awaited Capex cycle finally seems to be gathering momentum, after a
hiatus of 10 years. While there were false starts in the last decade, we believe the
recent post-COVID pick-up is looking sustainable and drivers are in place for
multi-year growth. In this report, we have done a detailed bottom-up analysis of (a)
1,700+ government projects that are under implementation (explaining >60% of
total government Capex of FY22) and (b) Capex plans of top 400+ private sector
companies to better understand the drivers and likely shape of the Capex demand
curve. The analysis clearly highlights multiple engines of growth starting to fire
together, which would lend stability and visibility to capital outlay in the economy
over FY22-26. While to an extent the government Capex growth would remain a
function of tax collections (FY23 expected to be strong), we believe private sector
Capex is on a cusp of pick-up, aided by confluence of multiple enablers such as
deleveraged corporate balance sheets and healthy profitability, a well-capitalized
banking system with NPA cycle over, rising domestic demand as well as mid-cycle
capacity utilization, and interest rates. We remain positive on investment-led
growth cycle. Our top picks within our coverage universe to play this multi-year
theme are financials (ICICI and Axis), capital goods/infra (L&T, Siemens,
Cummins, and GR Infra) and capacity expansion-led volume growth in UltraTech,
Dalmia Bharat, Navin Fluorine, Aarti Industries, NTPC, Phoenix Mills, and Havells
India.
Key takeaways from our study:
 The sharp pick-up in government Capex during FY20-22 has been counter-
cyclical and while growth rates will taper down a bit due to base effect, it still
looks set for ~8-10% CAGR over the next 3-5 years, purely on the basis of
projects/schemes already under implementation. If tax collections remain
buoyant, government Capex can overshoot our estimates.
 Private sector Capex has lagged government Capex during FY20-22 but it will
now outpace public spending due to increasing Capex across multiple sectors
(cement, metals, power, autos, chemicals and PLI-led Capex).
 The share of unlisted companies in overall private sector Capex is on a gradual
rise, led by sectors such as appliances, real estate, power, and technology.
 Government’s Capex program is a good blend of spends across (a) large verticals
such as roads, railways, defense, and power, which provide long-term visibility,
and (b) welfare schemes such as affordable housing, Jal Jeevan, Smart Cities,
Swachh Bharat 2, which will drive Capex for the next 4-5 years.
 Capex of states has been a positive surprise, with clear signs of cooperative
federalism at work across multiple sectors.
 In terms of state-wise comparisons, the government’s thrust on UP, north east,
and Madhya Pradesh is visible in capital outlays of these states while Gujarat, Varun Lohchab
Maharashtra, and Karnataka continue to be the favourites for private Capex. varun.lohchab@hdfcsec.com
Overall Capex share in India +91-22-6171-7334
INR Trn Center PSUs State Private

Amit Kumar,CFA
20 4.7 amit.kumar1@hdfcsec.com
4.3
3.8 +91-22-6171-7354
3.0 6.1 6.9
3.2 3.1 5.4
10 2.8 4.2 1.8
4.4 4.0 1.6 2.0
3.9 1.6 1.4 Atishray Malhan
1.3 1.4 9.6
7.4 8.1 8.6
4.7 5.5 5.9 atishray.malhan@hdfcsec.com
0
+91-22-6171-7363
FY18 FY19 FY20 FY21 FY22 FY23E FY24E
Source: MoSPI, Union Budget, Bloomberg, VCC Edge, HSIE Research
HSIE Research is also available on Bloomberg ERH HDF <GO> & Thomson Reuters
Focus charts
Exhibit 1: Private Sector Capex Breakdown Exhibit 2: Sectoral Split of Listed Private Sector Capex
from FY22 to FY24
Listed Private CAPEX Unlisted Private CAPEX
Conglomerates
5.0 Metals
4.0 27.0% Power/Utilities

4.9%
3.0 Telecom
5.0%
2.0 Cement and Building
5.4%
Materials
1.0 14.3% Autos
5.9%
0.0
8.9% Energy (Oil & Gas)
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23 (E)
FY24 (E)
11.5%
IT and Exchanges
Source: Bloomberg, Ace Equity, VCC Edge, HSIE Research Source: Bloomberg, Ace Equity, HSIE Research
Exhibit 3: Cost of all outstanding govt projects Exhibit 4:State-wise share of government Capex in FY22
Railways
Roads & highways
Power
15% 19% Defence
5%
Affordable housing
5%
15% Irrigation
5%
6% Petroleum
8% 14%
8% Jaljeevan
AMRUT
Others
Source: MoSPI, HSIE Research Source: MoSPI, HSIE Research
Exhibit 5: Capex done by various states (FY22) Exhibit 6: State Financials (FY21)
Capex/Core Capex/total Fiscal Public

800 FY21
revenues expenditure deficit/GSDP debt/GSDP
700
600 Karnataka 36% 19% 4% 17%
500 Madhya Pradesh 27% 14% 5% 25%
400 Gujarat 27% 14% 2% 19%
300 Tamil Nadu 23% 12% 5% 24%
200
Andhra Pradesh 22% 9% 6% 27%
100
0 Odisha 22% 14% 2% 16%
Tamilnadu
Andhra Pradesh
Karnataka
Kerala
West Bengal
Uttar Pradesh
North East
Odisha
Delhi
Chhatisgarh
Uttarakhand
Maharashtra
Jharkhand
Rajasthan
Telangana
Goa
Gujarat
Haryana
Himachal Pradesh
Bihar
Madhya Pradesh
Jammu & Kashmir
Puducherry
Uttar Pradesh 22% 15% 3% 28%

Kerala 19% 7% 5% 27%
Bihar 19% 11% 5% 29%
Telangana 19% 7% 5% 24%
Rajasthan 14% 8% 6% 32%
Maharashtra 14% 7% 3% 16%
West Bengal 12% 6% 3% 33%
Haryana 11% 5% 4% 27%
Source: CAG, State budgets Source: CAG, State budgets
Page | 2
Contents
Private sector ........................................................................................................... 4
Listed Private Sector Gross Block .................................................................. 5
Listed Private Sector Capex ........................................................................... 6
Industry-specific Capex trends....................................................................... 9
PLI Capex ....................................................................................................... 13
Unlisted Private Sector ................................................................................. 14
State-wise distribution of private sector Capex ........................................ 15
Government sector Capex ................................................................................... 17
Roads and bridges ......................................................................................... 21
Railways ......................................................................................................... 26
Power .............................................................................................................. 32
Defense ........................................................................................................... 41
Petroleum and natural gas ........................................................................... 42
Urban development sector ........................................................................... 44
Jal Jeevan Mission .......................................................................................... 45
AMRUT............................................................................................................ 46
Irrigation ......................................................................................................... 48
Smart Cities Mission ..................................................................................... 49
Swachh Bharat Mission (SBM) .................................................................... 50
Affordable housing ....................................................................................... 51
State Capex ............................................................................................................ 53
Capex trends of various states ..................................................................... 58
Individual states—Capex trend and financial health ............................... 60
Page | 3
Private sector
Scope of research: The scope of our research in this section only extends to
Capex being done by domestic private listed entities in India. We have
individually looked at the 250 largest publically listed companies in India and
180 of the largest unlisted companies to understand the quantum and nature
of Capex done. The figures in this section do not account for any PSU Capex
or Capex done by privately listed companies in other countries unless
otherwise stated. Similarly, any related figures such as the gross block
presented only represent domestic fixed assets of listed private entities;
operating assets located in other countries are not being considered here.
Furthermore, intangible assets and goodwill have been netted off from the
gross block to represent tangible operating assets. One key exception that has
been made is for spectrum in the telecom space; it accounts for ~1/3 of the total
gross block and at least the same amount of Capex done by telcos. Being a key
operational asset and a sizeable one at that, the numbers in telecom specific
and cumulative figures include telecommunication spectrum. Lastly, while
PLI Capex is a subset of the broader listed and unlisted Capex figures, we have
considered it as a separate group of investments to highlight the investment
quantum directly attributed to the schemes.
Exhibit 7: Private Sector Capex Breakdown (INR trn)

Listed Private CAPEX Unlisted Private CAPEX PLI CAPEX
5.0
4.0
3.0
2.0
1.0
0.0
FY10
FY11
FY12
FY14
FY16
FY17
FY18
FY19
FY20
FY21
FY13
FY15
FY22
FY23 (E)
FY24 (E)
Source: Bloomberg, Ace Equity, VCC Edge, HSIE Research
Private sector Capex has seen an uptick in FY22 and is expected to be elevated
in FY23 andFY24. Increased demand visibility, diversifying global supply
chains, foray into newer products, and healthier balance sheets are some of the
key factors that are encouraging various domestic industries to add newer
capacities. As seen in the chart above, listed entities have been primarily
responsible for the Capex being done in India; however, the contribution of the
unlisted space has been gradually improving over the past decade. Capex from
the Production Linked Incentive (PLI) schemes is expected to ramp up from
FY23 onwards and will meaningfully contribute to private sector Capex. In this
section of the report, we shall explore some of the key dynamics of the nature
and quantum of Capex being done in India by the private sector across various
industries.
Page | 4
Listed Private Sector Gross Block

Exhibit 8: Private Listed Total Gross Block (INR Trn)
Private Listed Total Gross Block (INR Tn)
45 40.6
40 37.4
33.7 35.2
35 31.2
30 26.9
23.1
25 19.6
20 17.4 17.6
14.7
15 11.8
7.4 8.8 10.3
10
5
0
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY10
FY11
FY12
FY21
FY22
FY24 (E)
FY23 (E)
Source: Bloomberg, Ace Equity, HSIE Research
The gross block of domestic listed entities has grown at a CAGR of 13.9% from
FY10 to FY22, outgrowing the nominal GDP of India by ~290 bps over the same
time period. The gross block is forecasted to further grow at CAGR of ~7.5%
from FY22 to FY24. While the expected growth rate from FY22 to FY24 is lower
compared to the previous years, this is a reflection of (i) higher gross block base
being used for comparison and (ii) relatively lower Capex done in FY20 and
FY21. As emphasised in the forthcoming pages of this report, there has been a
considerable uptick in private sector Capex in FY22 which is expected to sustain
in FY23 and FY24. With an estimated average period of three years from
announcement to complete capitalisation, gross block growth in FY25 and FY26
will be more indicative of the capital investments estimated to be done from
FY22 to FY24.
Exhibit 9: Industries ranked by gross block size from FY10 onwards
Industry FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22
Energy (Oil & Gas) 1 1 1 1 2 2 2 3 2 3 3 3 3
Telecom 2 2 2 2 4 4 3 2 3 2 1 1 1
Metals 3 3 4 4 1 1 1 1 1 1 2 2 2
Autos 4 5 5 6 6 6 6 6 7 7 7 7 7
Conglomerates 5 4 3 3 3 3 5 5 4 4 4 4 4
Cement and Building
6 6 7 7 7 8 8 7 6 6 6 6 6
Materials
Power 7 7 6 5 5 5 4 4 5 5 5 5 5
IT and Exchanges 8 8 9 9 9 9 9 9 9 9 8 8 8
Real Estate 10 10 - - - - - - - - - - -
Industrials 9 9 8 8 8 7 7 8 8 8 9 9 9
Pharma - - 10 10 10 10 10 10 10 10 10 10 10
The table above only considers private companies, hence the relative underperformance of the Oil & Gas and Power sectors which would have been the
two largest industries by size if PSUs were to be included
Source: Ace Equity, HSIE Research
Page | 5
Listed Private Sector Capex

Exhibit 10: Total Private Listed Capex (INR Trn)
3.4
3.5 3.2 3.3
3.0 2.7
2.5 2.6
2.3 2.4
2.5 2.2
2.1 2.1
1.9 1.9 1.9
2.0
1.4
1.5
1.0
0.5
0.0
FY10
FY11
FY13
FY15
FY16
FY17
FY18
FY20
FY22
FY12
FY14
FY19
FY21
FY23 (E)
FY24 (E)
The graph above shows the cumulative value of the industries and companies
under the scope of our research. As indicated, the estimated total Capex being
done from FY22 to FY24 amounts to approximately ~10 INR trn, the highest in
any three-year stretch so far. The previous high for Capex incurred was in FY19,
primarily led by Reliance Jio, Reliance Retail, JSW Steel, and the auto industry
as a whole. FY19 Capex figure was outdone in FY22 and is expected to hit a new
record in FY23.
Exhibit 11: Share of major industries in total private sector Capex (listed)
Conglomerates Metals
Telecom Power/Utilities
Cement and Building Materials Energy (Oil & Gas)
Others
100%
50%
0%
FY11
FY12
FY14
FY15
FY16
FY17
FY19
FY20
FY21
FY22
FY10
FY13
FY18
FY24 (E)
FY23 (E)
As seen in the graph above, the six highlighted industries have consistently
contributed the most when it comes to absolute Capex; accounting for ~71% of
capital investments on average from FY10 onwards. From a standalone
industry perspective, private sector investment in metals is expected to lead
the way from FY22 to FY24, followed by power, telecom, cement, and oil &
gas.
Page | 6
Exhibit 12: Sectoral Split of Listed Private Sector Capex from FY22 to FY24
Conglomerates
Metals
The conglomerates pack is Power/Utilities
essentially being led by Reliance Telecom
(ex O&G), accounting for ~73% 27.0% Cement and Building Materials
Autos
of the segment’s Capex.
Energy (Oil & Gas)
Conglomerates, metals, power, IT and Exchanges
telecom, cement & building 5.0% Industrials
materials, autos, oil & gas, and Pharma
Chemicals
IT account for ~83% of the total 5.4%
Consumer Discretionary (ex-Autos)
estimated Capex being done 14.3% Real Estate
5.9%
from FY22 to FY24. Consumer Staples
Aviation
8.9% Textiles
11.5%
Appliances
Exhibit 13: List of top companies & groups ranked by size of Capex execution plans from FY22 to FY24
Aggregate Capex from
Company Project Details
FY22 to FY24 (INR bn)
Jamnagar refinery crude to chemical project, KG-D6 Gas development project, NEC-25 oil
exploration project
Reliance Ind. 2437 Jio - Spectrum payments, upgradation of telecom towers, data centres, & IAX multi-terabit
subsea cable project
Reliance Retail – Multi-location retail stores
Andhra Pradesh 10GW solar power project, Maharashtra pumped storage project, further
Adani Group 1178 exploring multiple hybrid projects such as co-located solar + wind projects.
Various investments in airports, roads, data centers, materials, metals & mining
JSW Steel Ltd. 561 7.5 MTPA Vijaynagar expansion, 3MT coke oven battery, 3.5 MT BPSL Plant
Expenditure on transport & rollout of the sub GHz spectrum, broadband, & data centres.
Bharti Airtel 453
Increased investment towards the 5G rollout and spectrum payments
Ramp up of aluminium and power capacities in Balco & VAL
Vedanta Ltd. 364 Considerable expansion in its zinc business in India
Multiple projects planned as a part of nearly doubling its India capacity to 40MT by FY30
Tata Steel Ltd. 254
in its plants at Jamshedpur, Kalinagar, Angul, and NINL
Vodafone Idea Ltd. 239 Expenditure on filling 4G gaps and 5G rollout, subject to capital raise
Multiple projects including 40bn spend on renewable capacity expansion through Tata
Tata Power 165 Power Renewable Energy, 30bn project in Tamil Nadu for manufacturing solar modules,
and NRSS transmission lines expansion
Continued expenditure on expanding pellet, HSM, and crude steel capacity
Jindal Steel & Power Ltd. 137
Development of four new coal mines
M&M 129 Capacity expansion auto, FES segment, and EVs
Continuation of Phase 1 expansion in Central and East India
UltraTech Cement Ltd. 124
Phase 2 capacity expansion in all regions except the West
Massive expansion in Haryana spread across 800 acres of land with an annual capacity of
Maruti Suzuki India Ltd. 120
250,000
Source: Bloomberg, Ace Equity, CMIE, HSIE Research
Page | 7
Exhibit 14: Industry specific relative Capex FY22-24
50%
Consumer Discretionary
40%, 25.0%
40% Power
46.6%, 32.0%
Metals
24.2%, 39.9%
FY21-24 Average Capex Growth
30% IT & Exchanges Appliances

33.5%, 23.7% 50.8%, 28.1%
Textiles
20% 30.0%, 23.8%
Chemicals
Cement
Automobiles 52.6%, 14.7%
33.2%, 22.4%
Real Estate
10% Telecom
Industrials 67.8%, 10.1%
Pharma
0%
0% 10% 20% 30% 40% 50% 60% 70% 80%
Energy (Oil & Gas)
-10%
Consumer Staples
Conglomerate
-20%
Aggregate FY22-24 Capex/FY22 Beginning Gross Block
*Telecom does not include Reliance Jio as all of Reliance’s businesses excluding Oil & Gas have been included in the
‘conglomerates’ industry. This has been done for both Capex & gross block calculations to maintain uniformity.
The bubble chart presented here compares the relative Capex being done in
different industries to the absolute amount of cumulative investment pouring.
The bubble size here represents the size of total Capex being done in each
respective industry. The horizontal axis represents the cumulative Capex from
FY22 to FY24 relative to the industry’s FY22 beginning gross block. This ratio
indicates the fixed assets soon to be capitalised relative to the industry’s total
gross block at the start of the Capex ramp-up. The vertical axis is the average
growth rate of Capex from FY21 to FY24. The sectors highlighted above are those
where relative Capex being added to the gross block and average Capex growth
figures seem to indicate an increased uptick in fixed assets to be added in the
forthcoming years. These industries are hence poised to display a higher delta
in their top-line from added capacities in the forthcoming years.
Our analysis shows that industries where structural tailwinds are rationalising
investment thesis’, are being backed by empirical evidence of added capacities;
namely real estate, chemicals, appliances, power, consumer discretionary,
cement, IT, metals, and textiles. In the next few pages, we will be highlighting
some key aspects of the investments happening in these industries.
Page | 8
Industry-specific Capex trends

The following graphs show the aggregate Capex done in the industries from
FY10 onwards. For some of the industries, the absolute Capex values have been
compared with the total annual OCF of the industries to evaluate the quality of
capacity additions being done. In general, the lower the Capex/OCF ratio, the
better the quality of Capex being done. Industries where the Capex is being
primarily done by internal accruals are the ones where sustainability of Capex
is more assured.
Exhibit 15: Metals
Total industry CAPEX (INR bn) Total CAPEX/OCF
600 160%
500 140%
120%
400 100%
300 80%
200 60%
40%
100 20%
0 0%
FY13
FY14
FY10
FY11
FY12
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23 (E)
FY24 (E)
The metals industry is adding a profound quantum of Capex over the

forthcoming years; ~1.4 INR trn from FY22-FY24. This would amount to ~24%
of the industry’s cumulative FY22 beginning gross block. As seen in the graph
above, the Capex is happening primarily through internal accruals, as the
Capex/OCF ratio is <50% for all three years. The previous expansion phase for
the industry from FY11-FY14 was largely fueled by debt, as indicated by the low
FCFs and high leverage ratios associated with the industry during the period.
The healthy expansion happening in this cycle helps add increased assurance of
sustainability and execution of the Capex going forward. The flagbearers of this
phase have been the usual suspects in the industry; Tata Steel, JSW Steel, and
Vedanta.
Exhibit 16: Power
500 400%
350%
400
300%
300 250%
200%
200 150%
100%
100
50%
0 0%
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23 (E)
FY24 (E)
The power sector in India accounts for the second-largest private sector
investment in the listed space from FY22 to FY24, contributing ~1.14 INR trn to
the aggregate Capex pool in the timeframe. As seen in the chart above, the Capex
amount done in FY22 and lined up for FY23 and FY24 are monumental. The
previous Capex cycle from FY10-12 was done through significant capital raise.
Page | 9
This time around, most of the Capex is expected to be done via internal accruals
with an average Capex/OCF ratio of 107% from FY22 to FY24. While the industry
is expected to be FCF negative till FY24, it bodes well for future earnings as
capacities are capitalised and eventually commercialised. The Capex is
primarily led by Adani Green, contributing ~45-46% of the aggregate pool. The
Capex in the industry is primarily taking place in expanding the country’s
renewable energy capacity, within which solar power is attracting most of the
investment. Besides capacity expansion, Capex is being done in other ancillary
subsections of the industry such as the manufacturing of solar PV modules. For
example, Tata Power is spending ~INR 30 bn in Tamil Nadu for the
manufacturing of 4GW worth of solar PV modules. Lastly, investments are
being done in the expansion of transmission lines across various states to enable
the delivery of the growing pool of total electricity generation.
Exhibit 17: Cement and building materials
250 100%
200 80%
150 60%
100 40%
50 20%
0 0%
FY13
FY14
FY10
FY11
FY12
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23 (E)
FY24 (E)
Construction and capacity additions cannot happen without cement. The

industry’s performance will closely track the supply side additions of the
country. Owing to that relationship, industry leaders have unanimously
announced plans to significantly increase their capacities. Barring FY22 where
OCF was disrupted heavily by cost inflation, the Capex is fueled by internal
accruals with a sufficient FCF buffer. An average of ~195 INR bn is being spent
annually from FY22 to FY24. Ultratech Cement, Shree Cement, Dalmia Bharat,
and Ambuja Cement account for ~56% of the Capex being done in this
industry.
Exhibit 18: IT & Exchanges
200 35%
30%
150 25%
20%
100
15%
50 10%
5%
0 0%
FY23 (E)
FY24 (E)
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
Led by expansions across the tier-1 companies, the IT industry is set to touch
new heights in terms of capacity expansion expenditure in FY23 and FY24.
Increased digitalisation and outsourcing of IT infrastructure development to
Page | 10
India is expected to be emphasised in a post-pandemic world. Capex spends in

FY23 and FY24 are expected to increase significantly, primarily led by opening
new offices in India, data center expansion, and maintenance Capex.
Exhibit 19: Chemicals
100 200%
80
150%
60
100%
40
50%
20
0 0%
FY15
FY20
FY10
FY11
FY12
FY13
FY14
FY16
FY17
FY18
FY19
FY21
FY22
FY23 (E)
FY24 (E)
The chemicals industry has seen a significant uptick in Capex from FY19
onwards when the Chinese chemical industry, the largest in the world by a fair
distance, started to witness profound and widespread shutdowns due to
regulatory and environmental clampdowns. The need for global supply chain
diversification became even more accentuated by the COVID-19 pandemic. The
Indian chemical industry gained traction as an alternative for its Chinese
counterpart, and companies started ramping up their capacities in anticipation
of higher demand. A total of ~ INR 212 bn is expected to be spent by Indian
companies from FY22-24 with annual Capex peaking in FY23 at ~ INR 76 bn.
The quality of capacity addition being done as well has improved drastically for
the industry, as indicated by the healthy Capex/OCF ratios from FY22-24. The
absolute Capex being done by the industry is not expected to hamper the FCF
generation potential, signaling the improving fundamentals of the Indian
chemicals industry. The companies primarily indulging in this capacity
expansion are Aarti Industries, Tata Chemicals, Gujarat Fluorochemicals,
Atul Ltd., Deepak Nitrite, and Navin Fluorine. SRF has not been included in
this list as it is being considered in the conglomerates segment.
Exhibit 20: Consumer Discretionary
70 120%
60 100%
50
80%
40
60%
30
40%
20
10 20%
0 0%
FY24 (E)
FY23 (E)
FY20
FY22
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY21
After a lull in FY21 due to the pandemic, the consumer discretionary is back on
its Capex growth trajectory, which it evidently embarked on boldly in FY18
where it grew ~33% YoY and stayed at an elevated level. With the exception of
FY22, where cost inflation and a left-tailed skew in OCF due to Titan Co.
hampered the industry’s figures, the Capex being added has been done at a
Page | 11
lower % of company OCF. This downward trend yields a positive interpretation

of the successful cash flows being accrued from incremental capacity addition.
Asian Paints, Avenue Supermart, and Aditya Birla Fashion are adding
sufficient capacities to their existing gross block and are contributing to the
uptick seen in the chart above.
Exhibit 21: Real Estate
Total Industry CAPEX INR bn
80
70
60
50
40
30
20
10
0
FY11
FY12
FY14
FY15
FY17
FY18
FY19
FY21
FY22
FY13
FY16
FY20
FY23 (E)
FY24 (E)
Capex in the real estate industry is taking place across the board by all the listed
players. Barring FY18, which was an outlier due to DLF’s one-time payments of
land purchases, FY22 to FY24 have decadal highs in terms of capital expenditure
for the industry. Due to the lumpy nature of cash flows generated by the
industry, we have not looked at the OCF trends as they would not help yield
any meaningful points of analysis. With the demand for commercial real estate
rejuvenated at the back-end of the COVID-19 pandemic, commercial portfolios
of real estate developers are expected to lead the Capex wave in the industry.
Prestige Estates, Oberoi Realty, and The Phoenix Mills are the companies
responsible for the largest Capex in this three-year period.
Exhibit 22: Textiles

30 160%
140%
25
120%
20
100%
15 80%
60%
10
40%
5
20%
0 0%
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY22
FY21
FY23 (E)
FY24 (E)
Considering FY16 as an outlier, where the spike in Capex came from Welspun,
FY22 to FY24 are expected to witness ~59 INR bn worth of Capex, as India
looks to rival Bangladesh and Vietnam in textile manufacturing. The industry
is adding ~30% of its FY22 beginning gross block over this time period. The PLI
Capex is expected to start for the textile scheme from FY23, which is not
included in the industry-specific chart above, and will inherently contribute
increasingly to the gross block. Welspun, Trident, Page Industries, and KPR
mills are the companies to look out for in the space.
Page | 12
Exhibit 23: Appliances

20 70%
60%
15 50%
40%
10
30%
5 20%
10%
0 0%
FY13
FY22
FY10
FY11
FY12
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY23 (E)
FY24 (E)
Similar to the consumer discretionary industry, the appliances industry will

grow in congruence with the average Indian’s disposable income.
Correspondingly, there is a likeness in the Capex pickup from FY18 and a drop
in FY21 between the two. While the quantum of Capex being added in the space
is just a drop in the ocean, relatively speaking, the industry is adding capacities
worth ~53% of the FY22 beginning gross block. Havells India, Dixon, Astral
Ltd., and Whirpool are the names to track in the space in relation to capacity
additions.
PLI Capex
Exhibit 24: Capex attributable to PLI schemes (INR bn)
1,200
Semiconductor
High-Efficiency Solar PV Modules
1,000 100 ACC Battery
Automobiles & Auto Components
800 300 Specialty Steel
300
63 Textile Products
600 Manufacturing of Pharmaceutical Drugs

200
250 Large Scale Electronics Manufacturing
310 Food Products
400 150
300 (KSMs)/DIs and pharma APIs
100
300 Drones and Components
200 50
300 300 White Goods (ACs & LED)
0 Telecom & Networking Products

0
IT Hardware(Laptop/Tab)
FY23(E)
FY25(E)
FY27(E)
FY30(E)
FY24(E)
FY26(E)
FY28(E)
FY29(E)
FY22
Mfg of Medical Devices
Data legend is presented in order of PLI schemes by size of total investment over the scheme’s tenure
PLI schemes are a subset of private sector investment that are expected to
meaningfully contribute to the aggregate pool as the schemes mature in
implementation. As seen in Exhibit 7, private sector Capex ex- PLI, somewhat
flattens in FY24. The PLI Capex then acts as a trigger of growth to sustain the
private sector investment momentum and ensure it’s continued growth. As we
will further explore in this report, central sector Capex is expected to be elevated
in the coming years and the PLI schemes act as the government’s plan to make
sure that private sector investment keeps up its pace. The estimated Capex
attributable to PLI schemes was ~INR 61 bn in FY22 and is expected to peak in
Page | 13
FY25 at ~INR 1,043 bn. The absolute contribution will be heavily dependent on
a few capital intensive schemes such as the ones for semiconductor chips, solar
PV modules, and ACC batteries. Because of the inherent nature of the schemes,
the explicit Capex attributable to the schemes is lumpy and limited; lasting a
maximum of seven years as in the case of the semiconductor scheme and as low
as three years like for ACC batteries. However, the schemes ensure the
incubation or development of manufacturing ecosystems in India, which will
quite possibly lead to a multiplier effect on the respective investments in the
future. It is imperative to note that these estimates are naturally constrained by
the pace and capability of effective and timely execution. Based on the detailed
analysis of the PLI schemes in our previous report, coupled with on-ground
activity, we have estimated the timing and quantum of the cumulative Capex
done in each scheme.
Unlisted Private Sector

Exhibit 25: Unlisted private sector Capex
Total CAPEX (INR bn) % of Total Private Sector CAPEX
800 25%
700
20%
600
500 15%
400
300 10%
200
5%
100
0 0%
FY11
FY15
FY10
FY12
FY13
FY14
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23 (E)
FY24 (E)
Source: VCC Edge, HSIE Research
Exhibit 26: Industry-wise split of Capex in FY20

Autos
5% 2% Consumer Staples
10% 4% Consumer Discretionary
4% Appliances
5%
Industrials
5% 6% Real Estate
0% IT
Energy
6%
11% Cement
Chemicals
Power
17%
Pharma
17% Aviation
4% Metals
5% Telecom
0% Conglomerates
Page | 14
Exhibit 27: Contribution of unlisted space in total industry Capex in FY20
Appliances
Real Estate
Power
IT
Consumer Staples
Pharma
Chemicals
Consumer Discretionary
Industrials
Cement
Autos
Telecom
Conglomerates
Metals
Aviation
0% 10% 20% 30% 40% 50% 60% 70%
Private sector Capex in the unlisted space has been rapidly picking up pace since
FY10, almost tripling its contribution to the total private sector investment in
this time frame. A lull in FY21 could be attributed to the COVID-19 pandemic,
as a similar trend was witnessed in the listed space as well. The three hotbeds of
capital investment in the unlisted space over the past decade have been autos,
power, and IT. Capex in autos is primarily being led by a developing EV
ecosystem in the country. Renewable energy is the prime driver of investments
in the power industry and this is expected to continue over the forthcoming
decade. Finally, the growth witnessed by the IT industry in the unlisted space
can be credited to the mushrooming growth of start-ups in the country.
State-wise distribution of private sector Capex

Exhibit 28: State-wise distribution of total private sector investments
announced from January 2020 (INR bn)
Source: CMIE, HSIE Research
Page | 15
Exhibit 29: Top 10 states by private sector’s total announced projects from
January 2020 to July 2022
Foreign Private
Under
Total No. of Announced Sector share (% of
State Implementation
Projects* (INR bn) total announced
(INR bn)**
projects )
Gujarat 920 4,590 1,115 35.7%
Maharashtra 486 3,264 1,008 6.4%
Karnataka 578 3,234 519 18.0%
Odisha 210 2,951 422 35.4%
Tamil Nadu 342 2,693 381 19.8%
Rajasthan 158 1,515 1,180 2.5%
Telangana 250 1,147 233 27.4%
Andhra Pradesh 169 1,092 166 16.9%
Uttar Pradesh 143 635 206 9.4%
West Bengal 109 610 65 2.3%
*Total number of projects include all announced projects at various stages of the project cycle
**Value of projects in the under implementation column represent the total value of projects where work has
started to some extent and NOT the total value of Capex that has been till 4th August 2022
Source: CMIE, HSIE Research
Page | 16
Government sector Capex

Scope of research: For understanding the granularity of efforts of central and
state governments towards capital expenditure in India, we adopted the
bottoms-up approach. We selected a diversified sample of 1,700 projects
(explaining >60% of total government Capex of FY22), representing various
sectors like roads, railways, power, petroleum, urban development, and
irrigation. Progress of each of these projects, financial expenditure in current
year, hurdles in execution and projected expenditure in next three years were
analysed. Contributions of state and central governments towards each of these
projects were also considered in the analysis.
Our observations reflect that there is a clear focused strategy of central
government to formulate long-term solutions by investing in infrastructure
creation rather than handing over tactical one-time monetary benefits to the
citizens. The idea of the whole Capex exercise is to create jobs in urban and rural
areas that could indirectly boost consumption in a sustainable manner.
Below table summarizes our study of mentioned projects. It can be noticed that
main drivers of Capex in the country are Railways, Defense, Petroleum, Roads
and Power which are targeted to boost economic growth of country. Capex in
various other mentioned sectors are focused towards ground level social
welfare. In following sections, we have discussed the key sectors in detail.
Exhibit 30: Overall snapshot of government Capex
Cost of
Money spent
All figures are in INR bn outstanding FY23E FY24E FY25E
in FY22
projects
Under Implementation Projects
Railways 11,056 1,683 1,140 1,248 1,194
Defence 5,500 1,458 1,559 1,683 1,818
Petroleum 3,170 1,123 1,295 1,255 1,227
Road transport & highways 5,866 936 596 586 581
Power 3,684 775 1,008 850 897
Affordable housing 5,374 772 781 847 912
Jaljeevan 3,600 427 523 648 773
Irrigation 2,409 359 141 153 180
Metros (Urban transportation) 3,079 323 286 323 339
Atomic energy 2,582 158 180 236 192
Smart Cities Mission 1,000 130 134 137 137
AMRUT 776 121 130 - -
Swachh Bharat (G) 1,409 92 111 123 131
Airport 754 84 103 114 84
Swachh Bharat (U) 1,416 78 89 116 136
Total of under implementation 51,675 8,517 8,075 8,320 8,601
Under development Projects
Power 6,082 478 713 931
Road transport & highways 4,108 - 668 685 822
AMRUT 2.0 2,669 - - 187 267
Irrigation 1,730 - 86 95 151
Railways 1,664 - 178 272 377
Petroleum 444 - 31 111 143
Total of under development 16,696 - 1,440 2,062 2,689
Combined total 68,371 8,517 9,514 10,382 11,290
Others 13,000 6,476 7,253 7,978 8,776
Grand total 81,371 14,993 16,767 18,360 20,066
YoY Growth 12% 10% 9%
Source: HSIE research, MOSPI, Union & state budgets
Page | 17
Further, below map chart shows state wise expenditure in FY22. This covers INR
4.3 trillion worth of capital spends. In addition to this, government spent INR
4.2 trillion on multi-state projects which mainly include railways, petroleum and
roads infrastructure projects. It can be inferred that major portion of Capex has
taken place in Uttar Pradesh, Maharashtra, Andhra Pradesh and Tamilnadu.
Exhibit 31: State-wise share of government Capex in FY22
Source: MoSPI, HSIE Research
Financing of Capex: As revenue collection of central government is a major

driver of Capex projects in India, it is imperative to analyse its trend over the
years. In the below charts, we can notice that tax collections have been rising
and have been robust in FY22 on the back of strong economic revival post
COVID. Further, tax to GDP ratio has almost been at its peak. India reported
revenue collection of INR 27.1 trillion in FY22, which is 22% higher than FY22
budget estimates and reflects 34% YoY growth compared to FY21. Hence, it will
not be realistic to expect similar sharp upsurges in tax and non-tax revenues in
the coming years on an elevated base. We build a scenario of moderate mid-teen
growth in revenue. Any slowdown in tax collections would be a key downside
risk to the planned Capex programs across sectors in the country.
Page | 18
Exhibit 32: Revenue collections (INR trillion) Exhibit 33: Tax to GDP ratios
Indirect tax Direct tax Direct tax/GDP Indirect tax/GDP Total tax/GDP
30 15.0%
20 10.0%
10 5.0%
0 0.0%
FY01
FY03
FY05
FY07
FY09
FY11
FY13
FY15
FY17
FY19
FY21
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
Source: Press Information Bureau, GoI Source: Press Information Bureau, GoI
In our view, a few of the Capex agendas are long term in nature and will last for
several years to come while many others will be completed within the next five
years. We believe railways, defense, power and roads are more longer-term in
nature and are expected to keep driving Capex program of India for at least a
decade. At the same time, other schemes like urban development, affordable
housing, Swachh Bharat mission, irrigation, and Jal Jeevan mission are expected
to get over in the medium term (~5 years). Government may need to formulate
new welfare schemes to replace these in future.
PM - Gati Shakti
To synchronise efforts of various ministries carrying out several Capex projects,
central government has launched PM Gati Shakti - National Master Plan for
Multi-modal Connectivity. It is essentially a digital platform designed to bring
together 16 ministries for the purpose of integrated planning and coordinated
implementation of infrastructure connectivity projects.
The multi-modal connectivity is expected to provide integrated and seamless
connectivity for movement of people, goods, and services from one mode of
transport to another. It will also utilise technology extensively including spatial
planning tools with ISRO (Indian Space Research Organisation) imagery
developed by BiSAG-N (Bhaskaracharya Institute for Space Applications and
Geoinformatics).This program is expected to enhance India’s global
competitiveness, reduce travel time and reduce logistics cost through next
generation infrastructure.
Page | 19
Indian logistics market

In order to comprehend roads and railway sectors better, their contribution to
the logistics sector has also been analysed.
Currently, the logistics sector represents 5% of India’s GDP and handles 4.6
billion tonnes of goods each year, amounting to a total annual cost of INR 9.5
trillion. In addition, it employs 22 million people. The goods transported
represent variety of domestic industries and product categories. Out of these,
39% are manufactured goods, 39% are mining products and remaining 22% are
agricultural goods.
The broad break-up of logistics market across modal categories can be seen in
the below pie chart:
Exhibit 34: % Share of freight logistics
1% 1%
6%
Road
26% Railway
Water
66% Pipeline
Air
Source: Indian Railways
It can be easily inferred that roads enjoy a dominant position in the Indian
logistics markets. However, a deeper look at various transportation modes
reflects further insights. The below comparison between various modes of
transportations reflects that roads are not only expensive way of moving goods,
but they pollute more as well compared to other modes. Due to rapid
electrification of railways and a shift away from coal-based engines, pollution
caused by railways is relatively much lower. Contrastingly, electrification of
road transport vehicles is negligible as of now and major source of fuel is still
fossil-based, causing enormous amounts of pollution every day. In spite of these
factors, due to capacity constraints of railways, the roads sector has been taking
advantage and gaining higher market share at the expense of railways. This has
resulted in elevated costs of transportation for the industry and addition to
pollution levels. It can be concluded that if logistics costs are to be reduced in
India, then the share of railways in overall freight basket needs to improve.
Mode Rail Road Waterways Air Pipeline
Market share 26% 66% 6% 0.5% 1.5%
Cost (INR/tonne-Km) 1.6 3.6 2 18 2
Co2 emissions (gm
11.5 101 11 630 8
Co2/tonne-km)
Flexibility with respect
Medium High Low Medium Low
to the type of goods
Railways have not always been the marginal contributor to the logistics
industry; rather it used to hold >60% share of freight basket in the 1980s. The
earlier dominance of the railways has gradually been overpowered by the
roads sector due to the latter’s consistent focus on capacity addition and
upgradation. We will discuss roads and railways sectors in detail in the
forthcoming sections.
Page | 20
Roads and bridges

India has the second-largest network of roads in the world of about 63.72 lakh
km. This comprises national highways, state highways, district roads, rural
roads, and urban and project roads. National highways (NH) of 1.4 lakh km
and state highways (SH) of 1.7 lakh km together at 3.1 lakh km form the
domestic network on which surface logistics of Indian economy largely
depends. This is well understood that logistics cost in India at 14% of GDP, as
compared to global average of 8%, is a major hindrance in the way of economic
growth. Hence, it has been a priority for central government to focus on
increasing NH & SH network, apart from developing multi-modal connectivity.
Increased connectivity is expected to bring down logistics cost, create
employment, accelerate urbanisation, and improve export competitiveness of
certain goods.
Exhibit 35: Roads in India (FY22)
8%
6% National highways
2% State highways
3%
District roads
10% Rural roads

71%
Urban roads
Project roads
Source: MoRTH, NHAI
The ministry of road transport & highways (MoRTH) is responsible for

development of road transport & highways in general and development of
highways in particular. Apart from NHs in various states, all other roads fall
within the jurisdiction of respective states. However, MoRTH allocates funds for
development of state roads under the Central Road Infrastructure Fund (CRIF)
scheme.
The below charts reflect the growth of highway construction in India since FY14.
It is worth mentioning that government intends to reach a NH network of two
lakh kms by 2025.
Exhibit 36: Length of national highways
Length of National(kms)
highways (KM)
1,40,995
1,36,440
1,32,995
1,32,499
1,26,500
1,14,158
1,01,011
97,991
91,287
79,116
76,818
70,934
70,934
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22
Source:NHAI
Page | 21
Highways(KM)
Exhibit 37: Highways constructed constructed(KM)
Length constructed(KM) KM/Day
14,000 37 40
12,000 30 29
27 28
10,000 30
23
8,000 17 20
6,000 12 12
4,000
10,237
13,327
10,855
10,457
10
4,260
6,061
8,231
9,829
4,410
2,000
- 0
FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22
Source: NHAI
In the last two decades, the government of India had launched various
initiatives to upgrade and strengthen NHs through national highway
development projects (NHDP). Now, it is taking the progress forward with
umbrella program of Bharatmala Pariyojna and other schemes.
The scope and status of these schemes are as below. From the overall scope of
projects of 50,158 kms (the total project cost—INR 7.62 trillion), approximately
31,894 kms are yet to be completed.
Components Total length (Km) Length completed up to Dec’21 Project cost (INR bn)
Bharatmala Pariyojna (Phase-1)
Economic Corridors 9000 1557 1200
Inter Corridors & Feeder Roads 6000 562 800
National Corridor Efficiency Improvement 5000 1012 1000
Border & International Road Connectivity 2000 1120 250
Coastal & Port Connectivity Roads 2000 52 200
Expressways 800 449 400
Sub total 24800 4752 3850
Balance road works under NHDP 10000 2244 1500
Grand Total 34800 6996 5350
Other schemes
SARDP-NE* 6418 4121 850
LWE** 6085 5741 900
Externally aided projects 2855 1406 520
Overall total 50,158 18,264 7620
Bharatmala Pariyojna (Phase-2)- Under exploration
*SARDP-NE-Special accelerated road development program for North East **LWE- Left wing extremism affected areas
Source: NHAI, MoRTH
Exhibit 38: Financing of above projects is expected to be done in below

manner:
Financing sources Amount (INR bn)
Cess collected from petrol & diesel 2370
Toll collections 460
Additional budgetary support 600
Monetisation of NHs 340
Internal & extra budgetary resources (IEBR) 2092
Private sector investment 1060
Others 698
Total 7620
Source: NHAI, MoRTH
Page | 22
In the below chart, we can see the state-wise break-up of above under execution
projects. The top-5 states, namely Maharashtra, Uttar Pradesh, Karnataka,
Bihar, and Tamil Nadu account for 48% of the overall outstanding projects.
Exhibit 39: Outstanding project cost
Outstanding (INR
proje bn) Bn)
ct cost(INR
926
792
534
470
465
451
449
434
420
419
324
323
294
266
226
164
149
141
138
129
87
26
RAJAS THAN
ANDHRA PRADESH
JAMMU AND KASHMIR
KARNATAKA
UTTARAKHAND
MAHARASHTRA
UTTAR PRADESH
TAMIL NADU
MADHYA PRADESH
AS SAM
TELANGANA
WES T BENGAL
HIMACHAL PRADESH
ODIS HA
DELHI
CHHATTIS GARH
GUJARAT
JHARKHAND
KERALA
BIHAR
HARYANA
PUNJAB
Source:NHAI
The above outstanding projects (31,894 kms) offer us visibility of Capex for the
next three years. Further, there are several other projects, which are in pipeline
and their draft project reports are under various stages of approvals. For such
projects, total length to be awarded is 17,926 km and overall cost is expected to
be INR 3.87 trillion. Hence, it is evident that there is a sufficient trajectory of road
construction projects lying ahead for the country.
Furthermore, the below pie chart analyses pipeline projects and highlights that
Kerala, Karnataka, and Uttar Pradesh are focus states and they together
account for 48% of these under ideation projects (cost-wise).
Exhibit 40: Pipeline projects (cost-wise)
Kerala
Karnataka
Uttar Pradesh
Maharashtra
Tamil Nadu
West Bengal
Himachal Pradesh
3% 27%
4% Telangana
4% Punjab
4% Jharkhand
Madhya Pradesh
4% Chhattisgarh
5% Bihar
13% Andhra Pradesh
5%
5% Odisha
8% 8% Rajasthan
Haryana
Assam
Jammu and Kashmir
Uttarakhand
Gujarat
Source:NHAI
Page | 23
Execution in FY22
An in-depth analysis of ground level execution of these road projects reveals
that Uttar Pradesh has been leading the pack with superior execution.
Maharashtra, Bihar, Haryana, and Andhra Pradesh have also been reflecting
encouraging execution of such projects. The above-mentioned five states
accounted for 50% of overall capital expenditure done towards road projects.
Project executions were mainly led by the NHAI, followed by MoRTH.
Exhibit 41: State-wise Capex in FY22 Exhibit 42: Capex on road by agencies
Uttar Pradesh 0%
3%
2% Maharashtra
3%3% 18%
Bihar 11%
3% Haryana
25%
4% ANDHRA PRADESH
Madhya Pradesh CPWD
4% Odisha
Rajasthan MoRTH
5%
24% Gujarat NHAI
5% Uttarakhand
Karnataka NHIDCL
6% Nagaland 64%
Arunachal Pradesh
6% 7%
7% Jammu & Kashmir
Others
Source: HSIE Research, MOSPI Source: Source: HSIE Research, MOSPI
Special focus on the north east

Government has been paying special attention to development of NHs in the
north eastern (NE) region for connecting it to the rest of India and boosting its
economic prosperity. Hence, 10 percent of total budget allocation is earmarked
for the NE region. The Special Accelerated Road Development Programme in
North East (SARDP-NE) ensures planning and development of road projects in
this region. The total length of highways in the NE region is 13,651 kms, which
is developed and maintained by the National Highways & Infrastructure
Development Corporation (NHIDCL) along with the NHAI.
Financing and budget allocation trend

Given government’s clear focus on infrastructure and improving tax collections,
capital outlay on roads has been encouraging over the last six years. Although
this is a very impressive trend of rising outlays, we believe such allocations need
to be continued for several more years to come. In its absence, achieving
envisaged goals of highway construction projects would be difficult as other
sources of financing are limited.
Exhibit 43: Capital outlay on roads (INR bn)
bn
2,000
1,500
1,000
500
0
FY18A FY19A FY20A FY21A FY22RE FY23BE
Source: MoRTH, Union budget

Page | 24
Opinion It can be noticed that the pipeline of identified road projects is robust.
Further, the last few years have witnessed sufficient evidences of execution
prowess as well. In addition to that, budgetary allocation towards Capex
projects of roads have been very healthy so far. We believe all three mentioned
ingredients are required for desired growth in road infrastructure. While we can
be reasonably assured about the first two i.e. pipeline of future projects and their
executions, the third factor of capital allocation is largely dependent on healthy
tax collections by central government. As tax collections have already grown at
9.7% CAGR in the last five years (FY17-22) and tax/GDP currently stands at
11.7% (a 14-year high), one shouldn’t expect any further sharp upsurge in
government’s revenues. In light of this, we believe capital spend on road projects
would be a function of tax collections. Although maintaining the current pace of
execution is extremely feasible, the expected growth in Capex would be
moderate. Having mentioned this, if monetisation of NHs and private sector
participation gather pace, we may see Capex spend on roads accelerating.
Page | 25
Railways
The Indian Railways (IR) is a departmental undertaking of government of India,
which owns and operates India’s rail transport. It has the fourth-largest railway
network in the world. It has a total route network of 68,103 kms and electrified
route network of 44,802 kms. It also boasts of having 12,734 locomotives (diesel
and electric), 3,02,624 freight wagons and 79,835 passenger coaches (as on FY21).
It was responsible for running 13,169 passenger trains and 8,479 freight trains
every day to transport 22.15 million passengers and 3 million tonnes (MT) of
freight per day in FY20.
There are two main business segments and earning streams for Indian railways.
 Freight volumes: Freight is the major revenue-earning segment of IR. It

utilises one-third of its capacity and generates two-third of its revenue.
Freight business of IR is majorly supported by key commodities, viz., coal,
iron, steel, iron ore, food grains, fertilizers and petroleum products. The
below chart shows growth of freight carried and revenue earned over the
year. It can be noticed that FY22 has witnessed sharp growth in reported
freight and earnings after a few stagnant years. This has been possible due
to IR’s clear focus on need of growing modal share of railways in India’s
overall freight volume basket.
Exhibit 44: Indian railways—freight segment
Indian railways-fre ight segment
Freight originated (million tonnes) Earnings from freight carried(INR Bn)
1,500
1,000
500
0
FY10
FY11
FY12
FY14
FY15
FY16
FY17
FY19
FY20
FY21
FY22
FY13
FY18
Source: Indian Railways, HSIE Research
 Passenger traffic: Train travel remains the preferred means of long distance
travel for most Indians, as it is affordable and widely available. With
increasing income standards and urbanisation, passenger traffic is expected
to grow further.
Exhibit 45: Indian railways—passenger segment
Indian railways-Passenger segment
Passenger travelled (million) Earnings from passengers(INR Bn)(RHS)
10,000 600
8,000
400
6,000
4,000
200
2,000
0 0
FY10
FY11
FY12
FY13
FY14
FY17
FY18
FY19
FY20
FY21
FY22
FY15
FY16
Page | 26
Railway’s share in logistics market

Over the last seven decades, India’s logistics market has grown manifold from
87 MT in FY51 to 5,443 MT in FY22 (i.e. 55x). In the same period, rail cargo has
grown only 20x from 73MT to 1,418 MT. Hence, the market share of Indian
railways has de-grown consistently, from a whopping 85% in 1951 to 60% in
FY91 and 26% in FY22.
Given the chronic under-investment in IR over the years in expansion,
augmentation and upgradation of rail networks, it kept suffering from severe
capacity constraints. As a result, IR could not keep pace with increasing
transportation demand of growing Indian economy and kept ceding market
share to other modes of transportations, viz., road, waterways, and aviation. In
addition, capacity constraints resulted in low average speed of freight traffic,
poor transportation reliability, reduced throughput and lower freight earnings.
In contrast, other modes of transport, mainly roads, became more competitive
owing to consistent investments and friendly policy initiatives, viz. GST,
electronic toll collections, and increased axle loads.
Growth of the freight segment of IR has further been constrained as freight and
passenger trains both use the same railway network. Priority is often given to
passenger trains over freight movements and it affects transit time and
reliability of freight trains. While 60% of network capacity is deployed for
passenger traffic, this segment contributes only 30% to overall revenue of IR.
This distortion in asset utilisation has been crippling growth of IR over the last
several years. The ongoing construction of dedicated freight corridors (DFC) is
expected to solve this problem.
The below table reflects railway’s share in India’s logistics market (FY22) and
room for growth in various segments.
Commodity Total logistics market (MT) Railways (MT) % Share
Coal 1022 654 64%
Iron Ore 237 168 71%
Steel 137 68 50%
Steel RM 457 29 6%
Cement 423 139 33%
Food grain 316 73 23%
Fertiliser 73 50 68%
Petroleum 330 45 14%
Container 295 74 25%
Others 2153 118 5%
Total 5443 1418 26%
It can be clearly observed that freight basket of IR is heavily skewed in

comparison to overall logistics market. The top-5 commodities, viz. coal, iron,
steel, cement, and food grain account for 78% of overall basket. Consequently,
slowdown in businesses of any of the above-mentioned commodities can have
significantly adverse impact on overall freight volume. Hence, diversification of
commodity basket is an important aspect for consideration.
Further, in the below chart, we can compare the pace of growth of railway
freight segment vis-à-vis overall logistics market. It indicates an urgent need of
intervention for authorities to bring back IR’s significance.
Page | 27
Exhibit 46: Rail share in share

Rail India’s logistics
in India's market
logistics market
Logistics market (MT) Rail Share (MT) % Share
6000 29%
5000 28%
27%
4000 26%
3000 25%
2000 24%
23%
1000 22%
0 21%
FY12
FY13
FY15
FY16
FY17
FY19
FY20
FY21
FY22
FY14
FY18
Further, in the chart below depicting commodity-wise growth of rail cargo, it

can be seen that growth across commodities has been abysmal over the last
decade.
Exhibit 47: Rail cargo growth for coal (MT)
700 653
605 587
546 552 533 555 542
600 509
496
456
500
400
300
200
100
0
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
Exhibit 48: Commodity wise rail cargo growth (MT)

RM for steel Pig iron/steel Iron ore
Cement Food grains Fertilisers
Petroleum Containers Others
200
150
100
50
0
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
Need for capital expenditure projects

For gaining its dominance back, Indian railways has embarked upon a strategy
to achieve 3,000 MT freight cargo by 2027. This initiative is named Mission-
3000. It aims to achieve an ambitious growth of 16.5% CAGR for the next five
years. This will require addressing various supply-side constraints. To ease
these constraints, there is an immediate need to commission identified critical
capacity enhancement projects. It will include augmentation and upgradation
of railway network and rolling stock fleet.
Page | 28
Future planned Capex projects

The below table reflects future planned Capex projects across various verticals
and their expected timelines of executions. It is evident that capacity expansion
projects viz. doubling of lines, new lines and new wagons & locomotives are
key works that need to be executed to achieve the desired system throughput.
Total Year wise Capex (INR bn)
Capex
Key works
(INR bn) FY23 FY24 FY25 FY26 FY27
(in 5 Yrs)
Doubling of lines 2,131 320 320 533 533 426
New line 1,760 264 264 440 440 352
Gauge conversion 208 31 31 52 52 42
traffic facility & yard remodelling 242 36 36 60 60 48
Last mile connectivity to port, industry
220 33 33 55 55 44
hubs
Automatic signalling 130 20 20 33 33 26
Upgradation to 2*25KV 152 23 23 38 38 30
25T Axle load 102 15 15 26 26 20
Multi tracking 1,647 247 247 412 412 329
Transmission lines 108 16 16 27 27 22
Wagons Nos. 155872 @ INR 4.5mn per
701 105 105 175 175 140
Wagon
Locomotive 7014 Nos. @INR 150 Mn per
1,052 158 158 263 263 210
loco.
Total 8,455 1,268 1,268 2,114 2,114 1,691

Status of project executions

Apart from these above identified capital expenditure projects for future years,
Indian railways are carrying out several other key projects to augment and
modernise its capacity. We have analysed the bottoms-up execution of these
various projects. The below chart gives an overview of money spent on various
capital expenditure projects in FY22. In addition, we highlight that the key
segment of electrification of railways has been growing rapidly and current
extent of electrified railway network is shown in the below chart.
Exhibit 49: Capital expenditure (FY22-INR 2,150 bn) Exhibit 50: Electrification of railway route KMs
1%1% Rolling Stoc k
2% 6%
Lane doubling
2% 20% Investm ent in Go vt.Undertak ing
4%
EBR
34%
6% New Lines
Capital payment fo r Leased Assets
Track Renewals Electrified
7%
15% Electrif ication Projects Non-electrified
Yard Rem odeling
66%
9% Road Safety Works-over/under bridges
Gaug e Conversion
12% 15% Production Workshops

Others
Source: Indian Railways, HSIE Research Source: Indian Railways, HSIE Research
Further, in the below charts, we can observe the trend of expenditure done over
the years on various major developmental segments. The clear focus can be
observed around adding new lines, doubling existing lines, electrification
and adding new coaches & wagons (rolling stock).
Page | 29
Exhibit 51: Construction of new lines (INR bn) Exhibit 52: Gauge conversion (INR bn)
300 45
40
250
35
200 30
25
150
20
100 15
10
50
5
0 0
FY23E
FY23E
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY16
FY17
FY18
FY19
FY20
FY21
FY22
Exhibit 53: Lane doubling (INR bn) Exhibit 54: Traffic facilities & yard remodeling (INR
bn)
400 45
350 40
35
300
30
250 25
200 20
150 15
100 10
50 5
0 0
FY23E
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23E
FY16
FY17
FY18
FY19
FY20
FY21
FY22
Exhibit 55: Rolling stock (INR bn) Exhibit 56: Road safety works (INR bn)
500 70
60
400
50
300 40
30
200
20
100 10
0 0
FY23E
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23E
FY16
FY17
FY18
FY19
FY20
FY21
FY22
Exhibit 57: Track renewals (INR bn) Exhibit 58: Electrification projects (INR bn)
160 90
140 80
120 70
100 60
50
80
40
60
30
40 20
20 10
0 0
FY23E
FY23E
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY16
FY17
FY18
FY19
FY20
FY21
FY22
Source: Indian Railways, Rail budget, HSIE Research
Page | 30
Financing and budget allocation trend

As the government has re-strategised to focus on building up capacity, it has
been walking the talk, which is being reflected in the form of increased outlay
over the years. The rapid growth in capital expenditure towards railway projects
has been encouraging. Budgetary allocation is the primary source of financing
of all their Capex projects. The other important source of financing is market
borrowings. It is to be noted that Indian Railway Finance Corporation (IRFC), a
government of India owned entity, has specially been formed to raise market
borrowings on behalf of Indian railways. Its main work is to raise money from
markets and finance various developmental projects of railways. It leases rail
infrastructure and rolling stock to Indian railways and earns lease rental on this.
Hence, this has become an inexpensive way of continually financing railway’s
infra projects. Every year, the Indian railways gives a target of borrowing to
IRFC as per its Capex needs and assures an agreed upon spread on the raised
money. As of FY22, AUM of IRFC stood at INR 4,152 billion. IRFC
disbursement as a percentage of railways capital outlay has grown from 36%
in FY18 to 67% in FY21. Sustaining investments towards capacity creation by
Indian railways bodes well for country’s logistics as improved railway
infrastructure has the potential to reduce expenses and environmental pollution.
Exhibit 59: Capital outlay on railways (INR bn)
3,000
2,500
2,000
1,500
1,000
500
FY23E
FY18
FY20
FY21
FY22
FY19
Source: Union budget, HSIE Research
Opinion: We believe this is a commendable start by Indian railways by realising

its sliding position in the logistics market. New strategy of adding capacity at a
rapid pace needs to be supplemented with flawless execution and sustained
source of financing. In our view, they have done an appreciable job around
identifying new growth projects at a granular level and the execution has been
encouraging so far. Further, budgetary allocation will be a function of tax
collections and is expected to grow at a moderate pace here on. In addition, IRFC
has a strong AAA rated balance sheet with zero NPA, which will allow it to
continue raising borrowing from the market at cheaper rates. As fate of
budgetary allocations would be dependent on economic growth and tax
collections, IEBR will be a key driving force for financing. Overall, we believe
financing would not be a hurdle for Capex projects of Indian railways. We
remain constructive on Indian railways Capex growth story.
Page | 31
Power
Power sector is one of the critical elements of the nation’s economic
development. In the past few years, the ministry of power has taken massive
initiatives and transformed the country from being a power deficit nation to a
power surplus one. Since 2014, the country’s power generation capacity has
grown from 235 GW to 404 GW now. Transmission and distribution system
have also been strengthened.
We have analysed incremental changes in power generation capacity to discover
the states and fuel categories that are witnessing growth trends. Currently, fuel
mix of overall installed power generation capacities of India can be seen in the
below chart. Coal still dominates the overall mix but renewable segment has
been growing rapidly, indicating a greener future.
Exhibit 60: Installed power generation capacity (404 GW)
2%
Coal
28% Lignite
Gas
Diesel
50%
Hydro
Renewables
12%
Nuclear
2%
6%
0%
Source: CEA, HSIE Research
Considering the recent trends in capacity addition, we notice that overall

generation capacity in FY18 was 344 GW and currently in Jul’22, it stands at 404
GW. The below chart indicates the segregation of incremental capacity addition
across fuel categories since FY18. It can be noticed that renewables is a clear
focus area indicated by the fact that 75% of entire capacity addition in the last
three years was in the renewable space. It is expected to keep growing rapidly
in the near future.
Exhibit 61: Incremental capacity addition of 60 GW (FY18-now)
22%
Thermal
3%
Hydro
Renewables
75%
Page | 32
Additionally, it is important to note that government and private sector both are
contributing impressively in this capacity addition. It can be observed that
contribution of government and private sectors is almost equal in overall
installed capacity (below chart) but renewable energy capacity addition is
primarily driven by private sector. In fact, out of 114,438 MW of installed
renewable capacity in country, contribution of private sector is 110,352 MW.
Having mentioned this, it is important to highlight that public sector enterprise
NTPC has announced its plan of adding 60 GW of renewable capacity by 2030.
Therefore, in future, we will witness concerted efforts by public and private both
sectors, resulting in massive renewable energy capacity creation in the country.
Exhibit 62: Installed power capacity (404 GW)
24%
Central sector
50% State sector
Private sector
26%
Presence of private and government sectors across states

To understand granularity of power generation infrastructure, we further delve
deeper into state-wise categorisation of installed capacities for state, center and
privates sectors. Below charts reflect that private sector has been focusing on
growing their presence in states with stronger economic health viz. Gujarat,
Maharashtra, Rajasthan, Tamil Nadu, Andhra Pradesh and Karnataka. In fact,
these mentioned states accounted for 66% of overall private investments in
generation capacities. Furthermore, governments of a few of these states with
sound financial health also contributed towards capacity creations.
Maharashtra, Gujarat, Karnataka, Rajasthan and Telangana led the pack in this
category. Because of efforts from private and state sectors both, we witnessed
rapid growth in power generation in these states.
Exhibit 63: Private sector-Installed capacity(200 GW) Exhibit 64: State sector-Installed capacity(105 GW)
Gujarat Maharashtra
12% 16% Gujarat
Maharashtra 16% 13%
3% Karnataka
Rajasthan
Rajasthan
6% Tamil Nadu 3% 9% Telangana
11% Andhra Pradesh 4% Tamil Nadu
7%
Karnataka 6% Andhra Pradesh
8%
Chhatisgarh Uttar Pradesh
7% 10% Madhya Pradesh
Madhya Pradesh 6%
8% West Bengal
Uttar Pradesh 6%
9% Odisha
10% Punjab 7% Chhatisgarh
9% 7%
Others 7% Others
Source: CEA, HSIE Research Source: CEA, HSIE Research
Page | 33
At the same time, the Center focused on investing in the states, which require
inordinate amounts of power due to being populous and/or have inadequate
resources to invest in capacity creation on their own. Uttar Pradesh, Madhya
Pradesh, Bihar, Tamil Nadu, Himachal Pradesh and West Bengal appear in this
category.
Exhibit 65: Central sector-Installed capacity(99 GW)
Uttar Pradesh
13% Madhya Pradesh
20%
Tamil Nadu
Bihar
10%
3% Chhatisgarh
Himachal Pradesh
3%
9% West Bengal
5%
Maharashtra
7% Odisha
8% Karnataka
7% Telangana
8%
7% Others
Fuel mix of installed capacities across states

It is also important to note the trends of capacity additions in various states
based upon fuel categories. The below charts reflect focus of various states on
specific fuel type. Uttar Pradesh, Maharashtra, Chhattisgarh, Madhya Pradesh
and Gujarat, which traditionally have had industry focus, have a high
presence of coal as source of power generation. Mountainous states with
several hilly locations, namely Himachal Pradesh, Uttarakhand, and Karnataka
enjoy hydropower-installed capacities.
Exhibit 66: Coal power plants- Installed capacity(204 GW)
Uttar Pradesh
12% 12% Maharashtra
4% Chhatisgarh
Madhya Pradesh
4% 12% Gujarat
West Bengal
4%
Andhra Pradesh
5% Tamil Nadu
11% Odisha
5% Karnataka
6% Rajasthan
11% Bihar
7%
7% Others
Exhibit 67: Hydro power: Installed capacity(47 GW)

Himachal Pradesh
16% Uttarakhand
22% Karnataka
4% Jammu and Kashmir
Maharashtra
4% Telangana
Sikkim
5% 8%
Madhya Pradesh
5% Tamil Nadu
8% Odisha
5%
Gujarat
5% 7% Kerala
5% 6% Others
Page | 34
While industry-focused states had earlier been counting on thermal sources of

power generation, trend has been changing in the last decade. Many states have
been investing in renewables due to its obvious benefits with respect to lower
cost and benevolent environmental impacts. It is easy to recognise that the
presence of renewable capacities is very concentrated. Rajasthan, Gujarat,
Tamil Nadu, Karnataka, Maharashtra and Andhra Pradesh account for 78% of
overall capacity. As we recall, private sector owns 110,352 MW capacity in the
renewable space; we can infer that most of the private investments in wind and
solar space have taken place in above-mentioned six states. Due to the
supportive policies and presence of adequate amount of wind and sunlight, we
expect these states to lead forward the renewable journey of the country.
Exhibit 68: Renewables: Installed capacity(114 GW)
9% Rajasthan
17%
4% Gujarat
4%
Tamil Nadu
5% Karnataka
15% Maharashtra
8%
Andhra Pradesh
Madhya Pradesh
9% Telangana
15% Uttar Pradesh
14% Others
Key industry trends—growing capacity addition in select

states/fuel category
Further, we have deep dived to identify industry trends as to which fuel
category and states have witnessed growth in capacity addition since FY18.
These states and fuel category combinations can be monitored in the future for
tracking new power capacity creation and investments being done. A few of the
key growth trends can be obseved in the below set of charts. From these trend
charts, the follwing conclusions can be made readily:
 Focus of private sectors players is clearly on the renewable space. They are
investing and growing their renewable portoflios in the states of Andhra
Pradesh, Gujarat, Madhya Pradesh, Karnataka, Maharashtra, Punjab,
Rajasthan, Uttar Pradesh and Tamil Nadu. We don’t find strong evidence
of private players investing in thermal space. Hence, it is widely understood
that renewable is the new growth driver in the power space and it will keep
witnessing large amounts of Capex in the near future.
 Thermal power capacities are being created mainly in coal rich states, viz.
Odisha and Madhya Pradesh.
 Himachal Pradesh being the leader in hydro power generation space has
been further growing, led by Capex done by the Center. Resource rich
terrian in the state encourages new capacity additions.
Page | 35
Renewables (Installed capacity in MW)

Exhibit 69: Gujarat (Private
Gujarat- sector)
Renewables (Private sector) Exhibit 70:Rajasthan-
Rajasthan (private (private
renewables sector) sector)
20,000 20,000
15,000 15,000
10,000 10,000
5,000 5,000
0 0
Mar-18
Mar-19
Mar-20
Mar-21
Mar-22
Jul-22
Mar-18
Mar-19
Mar-20
Mar-21
Mar-22
Jul-22
Exhibit 71: Tamil Nadu (private
Tamilnadu-re sector) sector)
ne wable s (private Exhibit 72: Karnataka-Renewables
Karnataka (private (Private
sector) sector)
20,000 20,000
15,000 15,000
10,000 10,000
5,000 5,000
0 0
Mar-18
Mar-19
Mar-20
Mar-21
Mar-22
Mar-18
Mar-19
Mar-20
Mar-21
Mar-22
Jul-22
Jul-22
Exhibit 73: Maharashtra
Maharashtra-(Private sector)
renewables (Private sector) Exhibit Andhra
74: Andhra Pradesh
Pradesh- (Private sector)
Reneweables(Pvt sector)
12,000 10,000
10,000 8,000
8,000
6,000
6,000
4,000
4,000
2,000 2,000
0 0
Mar-18
Mar-19
Mar-20
Mar-21
Mar-22
Mar-18
Mar-19
Mar-20
Mar-21
Mar-22
Jul-22
Jul-22
Exhibit 75: Madhya

MadhyaPradesh (private sector)
Prade sh-Renewables (private sector) Exhibit 76: Uttar
UttarPrade
Pradesh (private(private
sh-renewables sector)sector)
6,000 5,000
5,000 4,000
4,000
3,000
3,000
2,000
2,000
1,000 1,000
0 0
Mar-18
Mar-19
Mar-20
Mar-21
Mar-22
Mar-18
Mar-19
Mar-20
Mar-21
Mar-22
Jul-22
Jul-22
Page | 36
Exhibit 77: Renewables-Punjab (private

Punjab-re newables (private sector)
sector)
2,000
1,500
1,000
500
0
Mar-18
Mar-19
Mar-20
Mar-21
Mar-22
Jul-22
Coal Power (Installed capacity in MW)
Exhibit 78: -Madhya
Madhya Pradesh (Central
prade sh-Coal sector)
(Ce ntral sector) Exhibit 79: Odisha (State
Odisha-Coal &&
(State central
Ce ntralsector)
sector)
10,000 7,000
6,000
8,000
5,000
6,000 4,000
4,000 3,000
2,000
2,000
1,000
0 0
Mar-18
Mar-19
Mar-20
Mar-21
Mar-22
Mar-18
Mar-19
Mar-20
Mar-21
Mar-22
Jul-22
Jul-22
Exhibit 80: Rajasthan (State (State
Rajasthan-Coal sector)sector) Exhibit 81: Bihar (Central sector)
BIhar-coal (ce ntral sector)
8,000 10,000
8,000
6,000
6,000
4,000
4,000
2,000
2,000
0 0
Mar-18
Mar-19
Mar-20
Mar-21
Mar-22
Jul-22
Mar-18
Mar-19
Mar-20
Mar-21
Mar-22
Jul-22
Hydro Electric (Installed capacity in MW)

Exhibit 82: Himachal
Himachal Pradesh
prade (Central
sh-Hydro sector)
(Ce ntral sector)
8,000
6,000
4,000
2,000
0
Mar-18
Mar-19
Mar-20
Mar-21
Mar-22
Jul-22
Page | 37
PSUs leading government Capex

In the power sector, most of the government Capex is carried out by leading
public sector entities; the large and notable ones are NTPC and NHPC for power
generation and Power Grid Corporation (PGCIL) for power transmission. Apart
from these, various state governments have their own entities for transmission
and distribution. Therefore, tracking Capex done by these mentioned entities
can give us an overview of the trend of government Capex in the power sector.
The below charts offer overview on capital expenditure done by these key power
sector PSUs.
As NTPC has announced its foray into renewable energy space, a sharp rise in
its planned Capex can be seen in FY23, which is expected to get supplemented
by Capex in later years as well. It is imperative to mention here that NTPC has
announced to add 60 GW of renewable power capacity by 2030. Going by the
current Capex cost of renewable generation capacities, it would require
investing around INR 350bn every year on an average. The current cash flow
generation capacity of the company along with its debt raising capacity
appear adequate to ensure smooth implementation of the plan. In addition,
SJVN Ltd has announced addition of 25 GW of renewable energy by FY30;
hence, its Capex amount is expected to rise sharply.
Further, Capex done by PGCIL had slowed down during COVID years;
however, the same is expected to inch up in coming years. Strong balance sheet
of PGCIL along with its cash flow generative capacity will see it through its
plans of transmission capacity creations.
Exhibit 83: CapexCapex
by NTPC (INR bn)Bn)
by NTPC(INR Exhibit 84: Capex byxNHPC
Cape (INR
by NHPC (INRbn)
Bn)
500 60
50
400
40
300
30
200
20
100 10
0 0
FY23E
FY24E
FY17
FY18
FY19
FY20
FY21
FY22
FY23E
FY24E
FY17
FY18
FY19
FY20
FY21
FY22
Source: HSIE Research, Bloomberg Source: HSIE Research, Bloomberg
Capeby
Exhibit 85: Capex x byPowergrid
Powe rgrid (INR
(INR Bn)
bn) Capeby
Exhibit 86: Capex x bySJVN
SJVN(INR
(INR Bn)
bn)
300 120
250 100
200 80
150 60
100 40
50 20
0 0
FY23E
FY24E
FY23E
FY24E
FY17
FY18
FY19
FY20
FY21
FY22
FY17
FY18
FY19
FY20
FY21
FY22
Page | 38
Transmission projects by states

Various state-owned power transmission entities have undertaken Capex
projects to augment their capacities in order to serve the state better. Overall,
there are INR 1865 bn worth of projects being executed by various state
transmission companies. Expected executions of key states are represented in
the below charts.
Exhibit 87: Ongoing transmission Capex (Total-INR Exhibit 88: Tamil Nadu transmission Capex-INR 512
1,865 bn) bn
Tamilnadu transmission (Total- INR 512 Bn)
Tamilnadu 120
Uttar Pradesh
17% 100
Telangana
28%
3% Karnataka 80
4% Gujarat
60
4% Assam
Andhra Padesh 40
4%
13% Rajasthan
4% 20
5% Maharashtra
7% Madhya Pradesh -
11%
Others FY23E FY24E FY25E
Source: State budgets, HSIE Research Source: State budgets, HSIE Research
Exhibit 89: Uttar Pradesh transmission Capex-INR 249 Exhibit 90: Telangana transmission Capex-INR
bn Uttar Prade shh transmission (Total-INR 249 Bn) 206bn Te langana transmission (total-INR 206 Bn)
82 50
80
78 40
76
30
74
72
20
70
68 10
66
64 -
FY23E FY24E FY25E FY23E FY24E FY25E
Exhibit 91: Karnataka transmission

Karnataka transmission Capex-INR
(total-INR 132 Bn) 132bn Exhibit 92:Gujarat
Gujarat transmission
transmission Capex-INR
(Total-INR 100 Bn) 100bn
25 29
24 28
23
27
22
26
21
25
20
19 24
18 23
FY23E FY24E FY25E FY23E FY24E FY25E
Page | 39
Opinion: There is a clear trend that renewables are the way to go in power
sector. Private sector has acknowledged it early and has already created a
commendable amount of capacity in this segment. Government’s nudge by way
of Solar PLI also seems to be pressing the right buttons. So far, public sector has
still been focusing on conventional energy space but now it is planning to grow
in the renewables space in a massive way, led by NTPC. In our view, NTPC has
adequate financial resources and project execution prowess to carry out the
mammoth 60 GW capacity creation plan. Therefore, we foresee a significant
renewable capacity creation by NTPC in the next decade. Furthermore, private
space has offered ample evidences of them being capable of raising finances and
executing projects in this segment. We believe private investments would keep
growing, as they are supported by conducive government policies. Overall, in
our view, the power sector will witness impressive execution of projects and
significant capacity addition in the next decade, led by concerted efforts of
private as well as government sectors. This will result in renewables taking a
larger portion of the overall installed capacity base of India.
Page | 40
Defense
Exhibit 93: Total defense outlay (INR bn)
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
FY23BE
FY18
FY19
FY20
FY21
FY22
Source: Union budget, HSIE Research
The above chart reflects budgetary outlay on defense projects over the years.
Given the strategic nature of these projects, it is expected that the government’s
focus and Capex amount on defense will continue to rise. As a strategic
directional trend, import dependence in defense procurement will keep
reducing. In the FY23 union budget, 68% of the capital procurement is
earmarked for domestic purchases, up from 58% in FY22. Furthermore, 25% of
the defense R&D budget has been allocated for start-ups, academia, and
private industry to encourage domestic innovations in the sector. Private
industries are given responsibilities of designing and developing military
platforms and equipment in collaboration with the Defense Research and
Development Organisation (DRDO). In our view, private sector led innovations
and rising budget allocations by the government will go a long way in reducing
import dependence of the sector. Given long-term nature of projects of the
sector, Capex in defense is expected to remain a long-lasting driver of Capex
projects in the country.
Opinion: In our view, defence will be a consistent driver of Capex in India.

Reducing import dependence in defence procurement is a significant trend that
will keep helping the domestic manufacturing industry.
Page | 41
Petroleum and natural gas

To continue the government’s agenda of improving supply-side dynamics and
boosting investments, state owned oil & gas companies are working on new
capital expenditure projects. ONGC, IOCL, HPCL and BPCL are leading from
the front to achieve Capex ambitions.
ONGC is focussing aggressively on exploration projects. Almost a third of the
entire planned Capex in the next three years will be done in the exploration
segment. It has envisaged adding around 100,000 sq. km of new exploration
area annually until FY25 on FY22 base of 1,61,000 sq. km. The other key player
IOCL is working at expanding its refinery capacity by a third in the next five
years as it sees growing fuel demand in the future. The below charts show the
trends of Capex for leading public oil & gas companies in the country.
Exhibit 94: Overall petroleum & natural gas Capex (INR Exhibit 95: ONGC Capex (INR bn)
bn) Overall Petroleum & Natural gas(INR Bn) ONGC (INR Bn)
1,400 600
1,200 500
1,000
400
800
300
600
400 200
200 100
0 0
FY23E
FY24E
FY17
FY18
FY19
FY20
FY22
FY21
FY23E
FY24E
FY17
FY18
FY19
FY20
FY21
FY22
Exhibit 96: IOCL Capex (INR

IOCL (INRbn)
Bn) Exhibit 97: HPCL Capex (INR bn)
HPCL(INR Bn)
350 150
300
250
100
200
150
100 50
50
0 0
FY23E
FY24E
FY17
FY18
FY19
FY20
FY21
FY22
FY23E
FY24E
FY17
FY18
FY19
FY20
FY21
FY22
Exhibit 98: BPCL Capex (INR

BPCL (INRbn)
Bn) Exhibit 99: GAIL India Capex
GAIL India (INR
(INR Bn)bn)
140 120
120 100
100
80
80
60
60
40 40
20 20
0 0
FY23E
FY24E
FY17
FY18
FY19
FY20
FY21
FY22
FY23E
FY24E
FY17
FY18
FY19
FY20
FY21
FY22
Page | 42
Exhibit 100: OIL India

OILCapex (INR
India (INR Bn)bn) Exhibit 101: Indraprastha gasGas
Indraprastha (INR bn)
(INR Bn)
100 20
80 15
60
10
40
5
20
0 0
FY23E
FY24E
FY17
FY18
FY19
FY20
FY21
FY22
FY23E
FY24E
FY17
FY18
FY19
FY20
FY21
Source: HSIE Research, Bloomberg FY22 Source: HSIE Research, Bloomberg
Exhibit 102: Gujarat gas (INR

Gujarat bn)Bn)
Gas (INR Exhibit 103: Mahanagar gasGas
Mahanagar (INR bn)
(INR Bn)
15 8
6
10
4
5
2
0 0
FY23E
FY24E
FY17
FY18
FY19
FY20
FY21
FY22
FY23E
FY24E
FY17
FY18
FY19
FY20
FY21
FY22
Exhibit 104: Gujarat statePe

Gujarat State petronet (INR
tronet (INR Bn)bn) Exhibit 105: Petronet LNG
Pe trone (INR bn)
t LNG(INR Bn)
15 20
15
10
10
5
5
0 0
FY23E
FY24E
FY17
FY18
FY19
FY20
FY21
FY22
FY23E
FY24E
FY17
FY18
FY19
FY20
FY21
FY22
Opinion: Most of the state-owned oil & gas companies have announced their
plans of augmenting capacities amidst rising concerns about ever-increasing
geopolitical instability and volatile crude prices. These companies have had
strong financial performances in the last couple of years. Led by this, their
operating cash flows are strong, financial leverage is low, and balance sheets are
healthy. In addition, AAA credit rating for most of these players enables them
to raise borrowings at cheaper costs. Financial strength and buoyant demand
environment is enabling them to invest in capacity expansion. In this backdrop,
we believe execution of announced Capex is extremely feasible in the medium
term. Having mentioned this, it is important to note that ongoing advances in
domain of alternative fuel generation and application (solar power & electric
vehicles) may keep long-term Capex plans of oil & gas companies under check.
Page | 43
Urban development sector

Urban development projects include development of urban infrastructure or
creation of urban mobility solutions. The key examples of such projects include
office-building construction for government staff. Another area of development
is metro rail projects in various cities.
For understanding this sector deeply, we analysed 33 ongoing urban
development projects worth INR 3,080 bn. We notice that various building and
social infrastructure creation projects are running smoothly; however, various
metro rail projects are moving at lower-than-expected pace.
For example, despite being announced in 2018-19, Patna, Bhopal and Indore
metro rail projects are only in the initial stages of construction. Land
acquisition and other governmental clearances happen to be the key
roadblocks for such projects. Similarly, Surat, Kanpur and Agra metro projects
are also moving at a snail’s pace. Having mentioned this, the situation is not as
bleak in other states. Metro projects in Ahmedabad, Bangalore, Nagpur, Pune,
Mumbai and Chennai are in advanced stages of construction. Although most
of these projects are falling behind their respective schedules, those in advanced
stages of construction offer optimism. Completion of such projects will surely
resolve urban mobility problems for city dwellers.
The below chart reflects the share of Capex spent in various geographies based
on our sample projects. Delhi and Maharashtra lead the pack due to ongoing
office construction projects in Delhi and metro rail projects in various cities of
Maharashtra.
Exhibit 106: Capex—Urban development (INR 3,080 bn)
Delhi
4% 2%
5% Maharashtra
7% 25% Karnataka
Gujarat
9% Multi state
Uttar Pradesh
10% Tamilnadu
18%
Madhya Pradesh
10% Bihar
10%
Kerala
Source: HSIE Research, MoSPI

Capex for urban development is expected to be slow in FY23 as many metro
projects need to pick up pace after achieving various required clearances. Once
their roadblocks are clear, these projects are expected to ramp up in later years,
as shown in the below chart. We believe that the delay in resolving project-
specific issues of metro rails would lead to suboptimal Capex figures in the
urban development segment.
Exhibit 107: Urban development Capex (INR bn)
Estimate d capex for urban de velopment (INR Bn)
360
340
320
300
280
260
240
FY22 FY23E FY24E FY25E
Source: HSIE Research, MoSPI
Page | 44
Jal Jeevan Mission

The Jal Jeevan Mission has envisaged facilitating various states and UTs to
ensure water supply to all the households in rural areas. The broad objectives of
the scheme are:
 To provide functional household tap connection (FHTC) to every rural
household
 To prioritise provision of FHTCs to drought prone or desert areas
 To monitor functionality of tap connections and develop human resource
for its maintenance
 To ensure sustainability of drinking water supply system i.e. water source,
water infrastructure, etc.
With support from the Center, various states have been implementing this
program. Since the inception of this scheme on 15 Aug 2019, a total of 67.6
million households have been given tap connections and water supply. As of
today, 99.9 million households, of the overall 191 million households (52% of
target), enjoy functional tap water connections and water supply facilities. The
current progress of the scheme across states can be seen in the below chart:
Exhibit 108: Progress of Jal Jeevan
Progre mission
ss of Jal projects
Jeevan Mission
Millions Total Households Households with tap water

30
25
20
15
10
5
0
Kerala
Tamilnadu
Andhra Pradesh
Assam
Karnataka
Telangana
Odisha
Uttar Pradesh
West Bengal
Punjab
Chhatisgarh
Jharkhand
Rajasthan
Gujarat
Maharashtra
Madhya pradesh
Bihar
Jammu & Kashmir

Haryana
Source: HSIE Research. Ministry of Jalshakti
As it can be noticed, states like Uttar Pradesh, West Bengal, Madhya Pradesh,
Andhra Pradesh, and Odisha need attention to make the scheme truly
successful. Further, the below charts reflect the expected Capex by Center and
states towards accomplishing the goal of 100% tap water connections in an
identified base of households.
Exhibit 109: Jal Jeevan Mission-Center (Total-INR 2,080 Exhibit 110: Jal Jeevan Mission-state (Total-INR
bn) Jal Je evan Mission - Ce nter (Total-INR 2,080 Bn) 1,520 bn) Jal Je evan Mission - State(INR 1,520 Bn)
600 400
350
500
300
400 250
300 200
150
200
100
100 50
- 0
FY20
FY21
FY22
FY23
FY24
FY25
FY26
FY20
FY21
FY22
FY23
FY24
FY25
FY26
Source: HSIE Research. Ministry of Jalshakti Source: HSIE Research. Ministry of Jalshakti
Given the pace of current execution, finishing the task of Jal Jeevan Mission
offers visibility of Capex for the next five years.
Page | 45
Atal Mission for Rejuvenation and Urban

Transformation (AMRUT)
AMRUT 1 was launched in June 2015 with a focus to establish infrastructure
that could ensure adequate robust sewage networks and water supply for urban
transformation by implementing urban revival projects. The total outlay is INR
776 bn. Key focus areas of AMRUT are as below:
 Water supply
 Sewerage and septage management
 Storm water drainage to reduce flooding
 Non-motorized urban transport
 Green space/parks
Under AMRUT 1, the Center and state have been spending progressively to
transform the urban areas of various states. The below charts reflect the
spending pattern of Center and various states on AMRUT projects since its
inception in FY16.
Exhibit 111: AMRUT 1-Center Capex (INR bn) Exhibit 112: AMRUT
AMRUT 11-state
- State Capex
(INR Bn)(INR bn)
AMRUT 1- Center(INR Bn)
70 80
60 70
50 60
50
40
40
30
30
20 20
10 10
- -
FY18
FY19
FY20
FY21
FY22
FY23
FY16
FY17
FY21
FY22
FY23
FY16
FY17
FY18
FY19
FY20
Source: HSIE Research, MoHUA Source: HSIE Research, MoHUA
Overall state-wise spending on AMRUT (FY16-FY23)

The below charts reflect geography-wise thrust areas of AMRUT 1 program. The
dominance of Uttar Pradesh, Tamil Nadu, Madhya Pradesh, and Maharashtra
can be noticed.
Exhibit 113: AMRUT 1: Contribution by Center
Uttar Pradesh
14%
Tamil Nadu
28% Maharashtra
Madhya Pradesh
13%
Karnataka
Gujarat
3% West Bengal
10% Rajasthan
3%
4% Punjab
5% 7% Bihar
6% 7% Others
Source: HSIE Research, MoHUA
Page | 46
Exhibit 114: AMRUT 1: Contribution by states

Uttar Pradesh
16% 16% Tamil Nadu
Maharashtra
4% Madhya Pradesh
4% Gujarat
15% Karnataka
4%
West Bengal
4% Andhra Pradesh
5% Haryana
10%
Rajasthan
6%
Punjab
7% 9%
Others
AMRUT 2.0
Observing the success of AMRUT 1, the government has launched AMRUT 2.0
in FY22. The overall project cost of INR 2,669 bn will be shared by the Center
and respective states. The expected outlay of the Center is INR 867 bn. This
scheme aims to provide 26.8 million reliable new tap water connections in all
the selected 4,800 towns. It also proposes to get universal household coverage of
sewer services in 500 AMRUT cities through 26.4 million sewer connections. The
rejuvenation of water bodies, parks, and open green spaces are other
components of the scheme.
Led by AMRUT 2.0, capital spending on urban development is expected to
continue for the next 5-6 years.
Page | 47
Irrigation
We have analysed granular progress of a sample of 77 key irrigation projects
ongoing in various states of the country. Overall, the cost of all these irrigation
projects is INR 4.14 trillion. This sample covers accelerated irrigation benefit
projects, repair, innovation and restoration projects, river cleaning and
interlinking of river projects. State-wise segregation of such projects on cost
basis can be seen in the below chart. Andhra Pradesh, Madhya Pradesh and
Maharashtra appear at the top of the league of key irrigation projects.
Exhibit 115: Ongoing irrigation Capex in India (INR 4.14 trillion)
Multi state
9%
8% Andhra Pradesh
12% Madhya Pradesh
5%
Maharashtra
4% Gujarat
3% Telangana
14% 3% NA
3% UP
2% 2% Uttar Pradesh
Jharkhand
5%
Odisha
Bihar
30%
Others
Source: HSIE Research, Ministry of Jal Shakti
As per the below chart, Capex spend on irrigation is expected to take a breather
before rising up again in FY25. This is because several large projects pertaining
to “interlinking of rivers” and “bridging of irrigation gaps” are being delayed.
There are multiple states involved in such projects and reaching a common
ground is required before starting the project. So far, the dialogues have not been
so fruitful and, hence, expenditure on such projects is expected to pick up pace
in later years. Example of such a large project is Godavari Cauvery link project,
with an expected project outlay of INR 850 bn.
Exhibit 116: Capex onCapex
irrigation
spend(INR bn)
on irrigation (INR Bn)
400
350
300
250
200
150
100
50
-
FY22 FY23E FY24E FY25E FY26E FY27E
Source: HSIE Research, Ministry of Jal Shakti
Given India’s dependence on agriculture and growing acknowledgement of

need of adequate irrigation, we expect irrigation Capex in various states to
continue over the next several years.
Page | 48
Smart Cities Mission

The Smart Cities Mission aims to drive economic growth and improve quality
of lives of people by achieving sustainable local area development using
technology. So far, INR 681 bn worth of developmental projects have been
completed.
Under the Smart City program, the following key achievements have been made
so far:
 Completion of 250 smart road projects to improve urban mobility
 To make cities more livable and sustainable, 85 smart water and 46 smart
solar projects have been completed
 Public private partnership: Along with government’s initiative, few private
companies are also investing in development of selected locality. Example:
Tech Mahindra won a project worth INR 5 bn to develop the Pimpri
Chinchwad Municipal Corporation, Pune. Amazon is participating with
the Smart City Program in a similar manner.
 With emphasis on river/lake fronts, city parks, play grounds and tourism
attractions, 62 urban space projects have been completed.
Further, the below pie chart reflects the focus area of the mission. Key states with
higher economic growth possibilities are being given more attention under this
scheme. In addition, it can be observed that after healthy growth in spending
from FY16 to FY19, capital spending towards smart cities reduced in FY20 and
FY21. This can be attributed to COVID and its impact, which slowed down the
pace of projects. However, from FY22, project executions have again picked up
speed. They are expected to continue for the next three years.
Exhibit 117: Overall Capex on smart cities (INR 987 bn)
2% Maharashtra
2%
Madhya Pradesh
30%
Tamil Nadu
6%
Rajasthan
6% Uttar Pradesh
Karnataka
6%
Andhra Pradesh
14%
Gujarat
7%
Punjab
8% Bihar
10%
9% Others
Exhibit 118: Capex on Smart

CapeCities (INR
x on smart bn)
citie s(INR Bn)
Center State
80
60
40
20
0
FY23E
FY24E
FY25E
FY16
FY17
FY18
FY21
FY22
FY19
FY20
Page | 49
Swachh Bharat Mission (SBM)

The Swachh Bharat Mission is aimed at making all the villages and states of
India “open defecation free (ODF)”. This initiative has been successful and now
all the villages under coverage have declared themselves ODF. This has
brought economic development, health benefit for citizens, and ensured dignity
and safety for Indian women. To take the implementation forward, government
has launched Phase-2 of the Swachh Bharat Mission, which will be called the
ODF Plus phase.
Key components of ODF Plus phase are: sustainability of ODF status,
biodegradable waste management, plastic waste management and sludge
management. This phase is also expected to continue to generate employment
and provide impetus to rural economy by way of construction of new toilets and
sanitary complexes. Further, it is expected to contribute to infrastructure
creation for solid and liquid waste management such as compost pits and
material recovery facilities.
The total outlay for SBM—Urban is INR 1416 bn, of which the center’s
contribution is expected to be INR 365bn. Furthermore, SBM-rural will have
an outlay of INR 1409 bn, with central government’s share of INR 916 bn.
Respective states will bear the remaining expenditure.
The charts below present expected capital expenditure by center and state
towards the scheme over the next several years.
Exhibit 119: Swachh Bharat
Swachh Capex-Urban (INR
Bharat-Urban(INR Bn) bn) Exhibit 120: Swachh
SwachhBharat Capex-Rural
Bharat-Rural (INR Bn) (INR bn)
Center State Center State
200 120
100
150
80
100 60
40
50
20
- -
FY22
FY23
FY24
FY25
FY26
FY27
FY28
FY29
FY30
FY21
FY22
FY23
FY24
FY25
FY26
FY27
FY28
FY29
Source: HSIE research, Ministry of Jal Shakti, MoHUA Source: HSIE research, Ministry of Jal Shakti, MoHUA FY30
In our view, expenditure towards this next leg of the Swachh Bharat Mission is
expected to continue until the end of this decade. In addition, it will create the
much needed employment in rural India. Government spending is expected to
work as one of the key levers for recovery in the subdued rural recovery. We
remain optimistic about positive impact of this scheme on rural prosperity.
Page | 50
Affordable housing
The objective of the scheme Pradhan Mantri Awas Yojna (PMAY) is to render
housing for all. It is focusing on development of houses in two categories—
urban and grameen. It also aims to make housing available to specific
demographics, viz. economically challenged groups, women, and minority
people, including scheduled castes and scheduled tribes.
PMAY—Urban
This mission addresses urban housing shortage among the EWS/LIG and MIG
categories, including slum dwellers, by ensuring a pucca house to all eligible
urban households. Under PMAY Urban, the government has sanctioned 12.3
million houses for construction. These will be built with a total investment of
INR 8.3 trillion. Committed central assistance is INR 2.03 trillion, out of which
INR 1.2 trillion has already been released. Various states cumulatively have
committed to invest INR 1.43 trillion and the remaining INR 4.85 trillion will be
spent by beneficiaries. Out of 12.3 million houses to be constructed, 6.21 million
houses have already been completed so far. Under PMAY, beneficiaries are also
eligible to claim interest subsidies under credit-linked subsidy program if they
avail a loan to buy a house. State-wise progress of the scheme can be seen in the
below chart.
PMAY—Rural
PMAY-G was launched by the prime minister on 20 November 2016, with an
objective of constructing 29.5 million houses by the year 2022. By FY21 end, 14
million houses were completed and 15.5 million were pending to be built. So far
INR 1.47 trillion have already been spent on this project. Seeing the progress
of the scheme, cabinet approved its continuation until FY24. For the remaining
houses, expected financial implication is INR 2.17 trillion. Central government
would contribute INR 1.25 trillion and INR 0.74 trillion will be given by
respective states. As of FY22, a total of 22.9 million houses have been
sanctioned, of which 17.7 million houses have been completed. For the key
states, progress of the PMAY-rural scheme can be seen in the below chart.
Exhibit 121: PMAY-Grameen progress (No. of houses, Exhibit 122: PMAY-Urban progress (No. of houses, in
in thousands) thousands)
Target Completed Sanctioned Delivered
3,000 2,500
2,500 2,000
2,000
1,500
1,500
1,000 1,000
500 500
0
0
Tamilnadu
Andhra Pradesh
Assam
Karnataka
Uttar Pradesh
West Bengal
Odisha
Chhatisgarh
Maharashtra
Jharkhand
Rajasthan
Gujarat
J&K
Bihar
Madhya Pradesh
Uttar Pradesh
West Bengal
Andhra Pradesh
Telangana
Karnataka
Tamil Nadu
Rajasthan
Odisha
Jharkhand
Gujarat
Madhya Pradesh
Maharashtra
Bihar
Others
Chhattisgarh
Source: HSIE Research, Ministry of Rural development, MoHUA Source: HSIE Research, Ministry of Rural development, MoHUA
The expected capital expenditure on PMAY-Urban and Rural is shown in the

below charts.
Page | 51
Exhibit 123: PMAY Grameen Capex (INR

PMAY-Gramin (INRBn)
bn) Exhibit 124: PMAY
PMAYUrban
Urban Capex (INRBn)
Capex (INR bn)
Centre State Centre State
300 400
250
300
200
150 200
100
100
50
0 0
FY23E
FY24E
FY25E
FY26E
FY21
FY22
FY23E
FY24E
FY25E
FY26E
FY21
FY22
Source: HSIE Research, Ministry of Rural development, MoHUA Source: HSIE Research, Ministry of Rural development, MoHUA
The current encouraging progress of PMAY is expected to continue for several

more years in the future. This will keep boosting demand in the industries that
serve housing construction such as building materials, housing credit, etc.
Page | 52
State Capex
To complement central government’s efforts to bring Capex-led economic
growth, various state governments have also been contributing
commensurately. This can be observed in the below chart that Capex done by
various states altogether has picked up sharply in FY22 after a short breather in
COVID-impacted FY21. It is expected to increase rapidly from here as well in
FY23 as per budget estimates of various states.
Exhibit 125: Trend of Capex done by states of India (INR bn)
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23E
Source: HSIE Research, CAG, State budgets
Further, it is noticeable that Uttar Pradesh, Karnataka, Maharashtra, North East

and Madhya Pradesh are the leading states focusing on Capex execution in
various economic and social verticals. Together, these states account for 47% of
the overall Capex by states in India.
Exhibit 126: Capex done by various states (FY22)

Capital expenditure in FY22 (INR Bn)
800
700
600
500
400
300
200
100
0
Uttar Pradesh
Kerala
Tamilnadu
West Bengal
Andhra Pradesh
Karnataka
Telangana
Uttarakhand
Rajasthan
Odisha
Himachal Pradesh
Delhi
North East
Haryana
Chhatisgarh
Jharkhand
Jammu & Kashmir
Goa
Gujarat
Maharashtra
Bihar
Puducherry
Madhya Pradesh
Page | 53
To understand the drivers of Capex by these states, we have analysed their

financial positions. Following table summarizes the fiscal health of the key
states:
Exhibit 127: State financials (FY21)
Capex/Core Capex/total Fiscal Public
FY21
revenues expenditure deficit/GSDP debt/GSDP
Karnataka 36% 19% 4% 17%
Madhya Pradesh 27% 14% 5% 25%
Gujarat 27% 14% 2% 19%
Tamil Nadu 23% 12% 5% 24%
Andhra Pradesh 22% 9% 6% 27%
Odisha 22% 14% 2% 16%
Uttar Pradesh 22% 15% 3% 28%
Kerala 19% 7% 5% 27%
Bihar 19% 11% 5% 29%
Telangana 19% 7% 5% 24%
Rajasthan 14% 8% 6% 32%
Maharashtra 14% 7% 3% 16%
West Bengal 12% 6% 3% 33%
Haryana 11% 5% 4% 27%
 We hypothesize that sound financials and healthy balance sheet of a state

enable it to focus on developmental agendas like Capex projects. For
example, it can be observed that in the year under consideration, Karnataka
has spent 19% of its overall expenditure on Capex. This has been aided by
its low fiscal deficit/GSDP of 4% and low debt/GSDP level of 17%. Odisha
and Gujarat are other similar examples where we see healthy capital
expenditure by a state with low fiscal deficit and public debt as compared
to its GSDP. It can be construed that states with more fiscal headroom are
more likely to opt for capital spending.
 On the other hand, a few other states with elevated fiscal deficit and public
debt vis-à-vis their GSDP have reported subdued capital expenditure
numbers. These include Andhra Pradesh, Kerala, Telangana and
Rajasthan. Higher debt levels eat up significant portions of core revenues of
states in the form of interest payments, leaving less room for developmental
expenditures. With higher fiscal deficit, the availability of funds to spend on
Capex is further lower. Additionally, raising new debt becomes more
difficult if the existing leverage of a state is already high.
 West Bengal and Haryana are examples of states that have significantly
high debt levels compared to their GSDPs; hence, in spite of low to
moderate fiscal deficit, they are not able to spend more on Capex.
 We observe Bihar, Madhya Pradesh, and Tamil Nadu had spent a
significant portion of their core revenues on Capex in spite of relatively
higher fiscal deficit and debt positions. We opine that these states won’t be
able to sustain higher Capex in future as deficits would need to be funded
by additional debt, which will aggravate the already-elevated level of their
financial leverage. In order to sustain Capex plans, these states need to
reduce their fiscal deficits.
 Maharashtra is a unique state that appears to have spent a significant
amount on Capex due to the sheer size of its economy. If we look closely,
we find that low fiscal deficit of 3% and moderate debt position of 16% as
compared to its GSDP give it sufficient room for aggressive Capex. Despite
its strong ability to spend, it has spent only 14% of core revenues towards
Capex, which forms only 7% of overall expenditures. Hence, we believe that
Maharashtra would accelerate its capital outlay in the future.
Page | 54
 The state with the highest reported capital expenditure in FY21 is Uttar
Pradesh. While it is very commendable, it is noteworthy that public debt of
the state is high at 28% of GSDP. This puts pressure on operating revenues
of the state. A low fiscal deficit of 3% helps the Capex ambitions, but for
sustaining it in the longer run, public debt levels should be reduced, else
we will witness Capex growth slowing down in the future.
 We conclude that the future state Capex programs of India will be mainly
led by fiscally disciplined states like Karnataka, Odisha, Gujarat,
Maharashtra and Uttar Pradesh. Other states, namely West Bengal,
Haryana, Rajasthan, Andhra Pradesh and Bihar, will find it tough to finance
their Capex aspirations without any external support.
In further sections, we have analysed Capex done by various states
Page | 55
10
15
20
25
30
0
5
50
20
40
80
40
60
80
20
60
0
0
0
100
150
200
100
120
100
Tamilnadu Uttar Pradesh Uttar Pradesh Karnataka
Karnataka Gujarat Tamilnadu Madhya Pradesh
Uttar Pradesh Odisha Karnataka Telangana
Maharashtra Bihar Rajasthan Maharashtra
Exhibit 132: Energy

West Bengal Karnataka Madhya Pradesh Gujarat
Haryana West Bengal Gujarat Uttar Pradesh

Madhya Pradesh Rajasthan Bihar Tamilnadu
Gujarat Haryana Odisha Andhra Pradesh

Bihar Madhya Pradesh West Bengal Odisha
Exhibit 134: Health & family welfare

Exhibit 128: Irrigation & flood control
Rajasthan Maharashtra Maharashtra Rajasthan

Odisha Kerala Haryana Bihar
Andhra Pradesh Andhra Pradesh Kerala West Bengal
Exhibit 130: Water, sanitation, housing & Urban

Kerala Tamilnadu Telangana Haryana
Telangana Telangana Andhra Pradesh Kerala
25
30
35
10
15
20
40
0
5
15
30
10
20
10
20
25
35
30
40
50
60
50
5
0
0
0
100
150
200
Sector-wise Capex done across states (FY21)
Andhra Pradesh Maharashtra Uttar Pradesh Uttar Pradesh

Uttar Pradesh Haryana Madhya Pradesh Tamilnadu
Madhya Pradesh Uttar Pradesh Bihar Maharashtra
Rajasthan Madhya Pradesh Telangana Karnataka
Karnataka Tamilnadu West Bengal Odisha
Exhibit 129: Transport
Bihar Gujarat Andhra Pradesh Gujarat

Gujarat Karnataka Kerala Madhya Pradesh
Exhibit 131: Rural development
Odisha Kerala Maharashtra Kerala
Exhibit 135: Education, sports & art

Tamilnadu West Bengal Tamilnadu Bihar
Telangana Rajasthan Gujarat West Bengal
Exhibit 133: Agriculture & allied activities
Haryana Odisha Rajasthan Rajasthan

Kerala Telangana Haryana Haryana
West Bengal Bihar Karnataka Telangana
Irrigation & transport lead the Capex program; water sanitation & housing other drivers
Maharashtra Andhra Pradesh Odisha Andhra Pradesh
Page | 56
0
1000
2,000
4,000
6,000
0
600
200
400
800
0%
5%
6%
7%
0%
1%
2%
3%
4%
10%
40%
20%
30%
Rajasthan Karnataka Uttar Pradesh Tamilnadu
Andhra Pradesh Madhya Pradesh Tamilnadu Maharashtra
Madhya Pradesh Gujarat Maharashtra Karnataka
Kerala Tamilnadu West Bengal Rajasthan
Telangana Andhra Pradesh Rajasthan Andhra Pradesh
Tamilnadu Odisha Gujarat Uttar Pradesh

Bihar Uttar Pradesh Karnataka Madhya Pradesh
Exhibit 142: Fiscal deficit/GSDP

Telangana
Exhibit 140: Capex/Core revenue

Haryana Kerala Andhra Pradesh
Exhibit 138: Public debt (INR bn)

Exhibit 136: Fiscal deficit (INR bn)
Karnataka Bihar Telangana West Bengal

West Bengal Telangana Madhya Pradesh Kerala
Uttar Pradesh Rajasthan Haryana Gujarat
Maharashtra Maharashtra Kerala Bihar
Gujarat West Bengal Bihar Haryana
Odisha Haryana Odisha Odisha
*Core revenue=state’s own tax revenue+share of union tax+non-tax revenue

Financial health of various states (FY21)
0
1,000
2,000
3,000
0%
5%
0%
20%
10%
15%
25%
20%
30%
10%
40%
10,000
20,000
30,000
West Bengal Karnataka Uttar Pradesh

Maharashtra
Rajasthan Uttar Pradesh Maharashtra
Tamilnadu
Bihar Odisha Tamilnadu
Karnataka
Uttar Pradesh Madhya Pradesh Karnataka
Uttar Pradesh
Andhra Pradesh Gujarat Madhya Pradesh
Gujarat
Kerala Tamilnadu West Bengal
West Bengal
Exhibit 137: GSDP (INR bn)
Haryana Bihar Rajasthan

Andhra Pradesh
Exhibit 143: Public debt/GSDP

Madhya Pradesh Andhra Pradesh Gujarat
Telangana
Exhibit 139: Core revenue (INR bn)
Tamilnadu Rajasthan Bihar

Rajasthan
Exhibit 141: Capex/total expenditure
Telangana Maharashtra Telangana
Madhya Pradesh
Gujarat Kerala Andhra Pradesh
Haryana
Karnataka Telangana Odisha
Kerala
Karnataka & Uttar Pradesh financially healthy; Rajasthan & Andhra Pradesh fragile
Maharashtra West Bengal Kerala

Bihar
Odisha Haryana Haryana
Odisha
Page | 57
Capex trends of various states

Karnataka, Maharashtra, North East, MP& Tamilnadu rising; Andhra & Rajasthan subdued
Exhibit 144: Uttar Pradesh(INR bn) Exhibit 145: Karnataka(INR bn)
Uttar Prade sh(INR Bn) Karnataka(INR Bn)
1,400 600
1,200 500
1,000
400
800
300
600
400 200
200 100
0 0
FY23BE
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23BE
FY16
FY17
FY18
FY19
FY20
FY21
FY22
Exhibit 146: Maharashtra(INR bn) Exhibit 147: North East (INR bn)
Maharashtra(INR Bn) North East (INR Bn)
700 800
600
500 600
400
400
300
200 200
100
0 0
FY23BE
FY23BE
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY16
FY17
FY18
FY19
FY20
FY21
FY22
Exhibit 148: Madhya Pradesh(INR bn) Exhibit 149: Tamilnadu (INR bn)
Madhya Prade sh(INR Bn) Tamilnadu (INR Bn)
500 500
400 400
300 300
200 200
100 100
0 0
FY23BE
FY23BE
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY16
FY17
FY18
FY19
FY20
FY21
FY22
Exhibit 150: Telangana(INR bn) Exhibit 151: Gujarat(INR bn)

Te langana(INR Bn) Gujarat(INR Bn)
400 400
300 300
200 200
100 100
0 0
FY23BE
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23BE
FY16
FY17
FY18
FY19
FY20
FY21
FY22
Page | 58
Exhibit 152: Bihar(INR bn) Exhibit 153: Rajasthan(INR bn)

Bihar(INR Bn) Rajasthan(INR Bn)
350 400
300
250 300
200
200
150
100 100
50
0 0
FY23BE
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23BE
FY16
FY17
FY18
FY19
FY20
FY21
FY22
Exhibit 154: Odisha(INR bn) Exhibit 155: West Bengal (INR bn)
Odisha(INR Bn) We st Be ngal (INR Bn)
500 350
300
400
250
300 200
200 150
100
100
50
0 0
FY23BE
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23BE
FY16
FY17
FY18
FY19
FY20
FY21
FY22
Exhibit 156: Andhra Pradesh(INR bn) Exhibit 157: Kerala(INR bn)

Andhra Prade sh(INR Bn) Ke rala(INR Bn)
350 200
300
250 150
200
100
150
100 50
50
0 0
FY23BE
FY23BE
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY16
FY17
FY18
FY19
FY20
FY21
FY22
Exhibit 158: Haryana(INR Cr) Exhibit 159: Jharkhand(INR bn)

Jharkhand(INR Bn)
Haryana(INR Cr)
250 200
200 150
150
100
100
50
50
0 0
FY23BE
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23BE
FY16
FY17
FY18
FY19
FY20
FY21
FY22
Page | 59
Individual states—Capex trend and financial health

Uttar Pradesh
Strong Capex in areas of transport, energy & irrigation; public debt level to be monitored
Exhibit 160: Irrigation & flood control(INR bn) Exhibit 161: Transport(INR bn)
70 250
60
200
50
40 150
30 100
20
50
10
0 0
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21
Exhibit 162: Water supply, sanitation, housing and Exhibit 163: Energy(INR bn)
urban (INR bn)
120 200
100
150
80
60 100
40
50
20
0 0
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21
Exhibit 164: Capex/Core revenues Exhibit 165: Capex/total expenditure
35% 22%
20%
30%
18%
25%
16%
20%
14%
15% 12%
10% 10%
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21
Exhibit 166: Fiscal deficit/GSDP Exhibit 167: Public debt/GSDP

6% 29%
5%
27%
4%
3% 25%
2% 23%
1%
21%
0%
-1% 19%
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21
Page | 60
Maharashtra
Healthy fiscal situation but only moderate Capex reflects ability to step up aggressively
Exhibit 168: Irrigation & flood control Exhibit 169: Transport
140 140
120 120
100 100
80 80
60 60
40 40
20 20
0 0
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21
Exhibit 170: Agriculture & allied activities Exhibit 171: Water supply, sanitation, housing and
urban development
60 25
50 20
40
15
30
10
20
10 5
0 0
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21

16% 11%
15% 10%
14% 9%
13% 8%
12% 7%
11% 6%
10% 5%
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21

3% 17%
16%
2% 15%
14%
1% 13%
12%
0% 11%
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21
Page | 61
Tamil Nadu
Rising fiscal deficit and debt levels indicate hurdles for Capex growth in future
50 160
140
40 120
30 100
80
20 60
40
10
20
0 0
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21
Exhibit 178: Water supply, sanitation, housing and Exhibit 179: Health & family welfare (INR bn)
urban (INR bn)
80 30
70 25
60
20
50
40 15
30 10
20
5
10
0 0
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21

26% 13%
24% 12%
22% 12%
20%
11%
18%
11%
16%
14% 10%
12% 10%
10% 9%
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21

6% 26%
5% 24%
5% 22%
4%
20%
4%
18%
3%
3% 16%
2% 14%
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21
Page | 62
Gujarat
Capex focused on transport, water & housing; relative Capex declines in line with core revenue
120 70
100 60
80 50
40
60
30
40
20
20 10
0 0
FY16
FY17
FY18
FY19
FY21
FY20
FY16
FY17
FY18
FY19
FY20
FY21
urban (INR bn)
60 40
50 35
30
40 25
30 20
20 15
10
10 5
0 0
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21
28% 20%
27% 19%
26% 18%
25% 17%
24% 16%
23% 15%
22% 14%
21% 13%
20% 12%
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21

3% 19%
18%
2%
17%
1% 16%
0% 15%
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21
Page | 63
Madhya Pradesh
Irrigation & housing rise; Capex growth unsustainable due to rising fiscal deficit and debt
120 80
70
100
60
80 50
60 40
30
40
20
20 10
0 0
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21
Exhibit 194: Water supply, sanitation, housing and Exhibit 195: Rural development(INR bn)
urban (INR bn)
60 50
50 40
40
30
30
20
20
10 10
0 0
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21

35% 19%
18%
30% 17%
16%
25% 15%
14%
20%
13%
15% 12%
11%
10% 10%
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21

6% 27%
5% 25%
4% 23%
3% 21%
2% 19%
1% 17%
0% 15%
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21
Page | 64
Karnataka
Role model for other states; all Capex engines firing supported by healthy finances
200 120
100
150
80
100 60
40
50
20
0 0
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21
Exhibit 202: Water supply, sanitation, housing and Exhibit 203: Health & family welfare(INR bn)
urban (INR bn)
80 25
70
20
60
50 15
40
30 10
20
5
10
0 0
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21

40% 20%
35% 18%
30%
16%
25%
14%
20%
15% 12%
10% 10%
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21

4% 18%
3% 16%
2% 14%
1% 12%
0% 10%
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21
Page | 65
Andhra Pradesh
Deteriorating finances leading to lackluster Capex performance
Exhibit 208: Irrigation & flood control(INR bn) Exhibit 209: Rural development(INR bn)
160 20
140
120 15
100
80 10
60
40 5
20
0 0
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21
Exhibit 210: Education, sports, art & culture(INR bn) Exhibit 211: Other administrative services(INR bn)
40 70
35 60
30
50
25
40
20
30
15
10 20
5 10
0 0
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21
24% 10%
22% 9%
20%
8%
18%
7%
16%
14% 6%
12% 5%
10% 4%
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21

6% 29%
5% 27%
25%
4%
23%
3%
21%
2%
19%
1% 17%
0% 15%
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21
Page | 66
Telangana
Capex program struggling due to weak state finances; rising debt, limit ability to grow Capex
160 35
140 30
120 25
100 20
80
15
60
10
40
20 5
0 0
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21
Exhibit 218: Rural development(INR bn) Exhibit 219: Water supply, sanitation, housing and
urban (INR bn)
30 45
40
25
35
20 30
25
15
20
10 15
10
5
5
0 0
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21

50% 30%
45%
40% 25%
35% 20%
30%
25% 15%
20%
10%
15%
10% 5%
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21

6% 26%
24%
5%
22%
4% 20%
3% 18%
16%
2%
14%
1% 12%
0% 10%
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21
Page | 67
Rajasthan
Deteriorating fiscal parameters indicate low ability to achieve Capex ambitions in future
30 50
25 40
20
30
15
20
10
5 10
0 0
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21
Exhibit 226: Water supply, sanitation, housing and Exhibit 227: Education, sports, art & culture(INR bn)
urban (INR bn)
60 14
50 12
40 10
8
30
6
20
4
10 2
0 0
FY16
FY17
FY18
FY20
FY21
FY19
FY16
FY17
FY18
FY19
FY20
FY21
28% 14%
26% 13%
24% 12%
22% 11%
20% 10%
18% 9%
16% 8%
14% 7%
12% 6%
10% 5%
FY17
FY18
FY19
FY20
FY21
FY16
FY16
FY17
FY18
FY19
FY20
FY21

10% 34%
32%
8%
30%
6% 28%
4% 26%
24%
2%
22%
0% 20%
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21
Page | 68
Odisha
Transport, irrigation leading Capex; healthy state finance offers ability to step it up further
80 100
70
80
60
50 60
40
30 40
20
20
10
0 0
FY16
FY18
FY19
FY21
FY17
FY20
FY16
FY17
FY18
FY19
FY20
FY21
urban (INR bn)
40 25
35
20
30
25 15
20
15 10
10
5
5
0 0
FY16
FY18
FY19
FY21
FY17
FY20
FY16
FY17
FY18
FY19
FY20
FY21
32% 24%
30% 22%
20%
28%
18%
26%
16%
24% 14%
22% 12%
20% 10%
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21

4% 16%
15%
3%
14%
2% 13%
12%
1%
11%
0% 10%
FY17
FY18
FY19
FY20
FY21
FY16
FY16
FY17
FY18
FY19
FY20
FY21
Page | 69
Kerala
Impressive growth in Capex led by transport; worsening fiscal health will limit its progress
Exhibit 240: Transport(INR bn) Exhibit 241: General economic services(INR bn)
40 40
35 35
30 30
25 25
20 20
15 15
10 10
5 5
0 0
FY16
FY17
FY19
FY20
FY21
FY18
FY16
FY17
FY18
FY19
FY20
FY21
urban (INR bn)
14 18
12 16
14
10 12
8 10
6 8
6
4
4
2 2
0 0
FY16
FY17
FY19
FY20
FY21
FY18
FY17
FY18
FY19
FY20
FY21
FY16

21% 10%
19% 9%
17% 9%
8%
15%
8%
13%
7%
11% 7%
9% 6%
7% 6%
5% 5%
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21

6% 29%
5% 27%
4% 25%
23%
3%
21%
2%
19%
1% 17%
0% 15%
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21
Page | 70
Bihar
Impressive attempt to recover Capex growth; weak finances will pose hurdles
30 60
25 50
20 40
15 30
10 20
5 10
0 0
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21
urban(INR bn)
60 90
80
50 70
40 60
50
30 40
20 30
20
10 10
0 0
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21

35% 25%
30% 20%
25% 15%
20% 10%
15% 5%
10% 0%
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21

6% 30%
5% 28%
4%
26%
3%
24%
2%
1% 22%
0% 20%
FY17
FY18
FY19
FY20
FY21
FY16
FY16
FY17
FY18
FY19
FY20
FY21
Page | 71
West Bengal
Struggling to grow Capex; rising debt level posing additional obstacles
19 60
18
18 50
17 40
17
16 30
16 20
15
15 10
14 0
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21
urban (INR bn)
60 30
50 25
40 20
30 15
20 10
10 5
0 0
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21
Exhibit 260: Capex/total expenditure Exhibit 261: Capex/Core revenues
11% 22%
10% 20%
18%
9% 16%
8% 14%
7% 12%
10%
6%
8%
5% 6%
4% 4%
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21

4% 34%
4% 32%
3% 30%
3% 28%
2%
26%
2%
24%
1%
1% 22%
0% 20%
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21
Page | 72
Haryana
Irrigation & transportation strong amid overall poor Capex; rising debt unfavorable
16 25
14
20
12
10 15
8
6 10
4
5
2
0 0
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21
Exhibit 266: Water supply, sanitation, housing and Exhibit 267: Health & family welfare(INR bn)
urban (INR bn)
30 9
8
25
7
20 6
15 5
4
10 3
5 2
1
0
0
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21
34% 16%
29% 14%
12%
24%
10%
19% 8%
14% 6%
4%
9%
2%
4% 0%
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21

7% 29%
6% 27%
5% 25%
4% 23%
3% 21%
2% 19%
1% 17%
0% 15%
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY17
FY18
FY19
FY20
FY21
Page | 73
Thematic reports by HSIE
Cement: WHRS – A key cog in the Autos: Where are we on “S” curve? FMCG: Defensive businesses but Autos: A changed landscape Banks: Double whammy for some India Equity Strategy: Atma Indian IT: Demand recovery in
flywheel not valuations Nirbhar Bharat sight
Life Insurance: Recovery may be Retail: Whole flywheel is broken? Appliances: Looing beyond near- Pharma: Chronic therapy – A Indian Gas: Looking beyond the India Equity Strategy: Quarterly Real Estate: Ripe for consumption
swift with protection driving term disruption portfolio prescription pandemic flipbook
margins
Indian IT: expanding centre of Indian Chemical: Evolution to Life Insurance: ULIP vs. MF Infrastructure: On the road to Cement: Spotting the sweet spot Pharma: Cardiac: the heartbeat of Life Insurance: Comparative annual
gravity revolution! rerating domestic market report analysis
Indian microfinance: Should you India Equity Strategy: Quarterly Autos: Divergent trends in PVs and India Internet: the stage is set FMCG: Opportunity in adversity - Logistics: Indian Railways - getting Industrials: Triggering a new cycle
look micro as macros disappoint? flipbook 2Ws A comparative scorecard aggressive
Indian IT: raising the bar India Equity Strategy: Quarterly FinTech Playbook: P2M Payments | India Hospitals: capital discipline Autos: Will EVs impact the ‘EV’? Cement: Riding High Power: Reforms essential for
flipbook Surging pool, dwindling yields improving, sustenance is key rennaissance
Fashion & Lifestyle: From a India Equity Strategy: Quarterly Indian Gas Sector: Resilience in the Consumer Durables: Fans - a Quarterly flipbook: Q2FY22– FinTech Playbook: Discount Footwear: No bargains here!
disruptor’s lens II flipbook eye of the storm compounding story but underrated Demand environment improves Brokers
but input cost inflation dents
profitability
Holdcos for portfolio Cement: A concrete road for net- FinTech Playbook: Buy Now Pay India Equity Strategy: PLI: Power: Shifting energy landscape: IT sector: Decoding signal from Vehicle Financing: Secular
diversification zero emissions Later | De-mystifying the Spearheading India’s Grey to green gains pace noise opportunity meets cyclical
tablestakes manufacturing push tailwinds
Health Insurance 1.0: Advantage

SAHIs
Page | 74
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INDIA EQUITY STRATEGY

Capex: on a sustainable upswing

Varun Lohchab Amit Kumar, CFA Atishray Malhan

India Equity Strategy

INR Trn Center PSUs State Private

4.0 27.0% Power/Utilities

Source: MoSPI, HSIE Research Source: MoSPI, HSIE Research

Capex/Core Capex/total Fiscal Public

Jammu & Kashmir

Uttar Pradesh 22% 15% 3% 28%

Exhibit 7: Private Sector Capex Breakdown (INR trn)

Source: Bloomberg, Ace Equity, VCC Edge, HSIE Research

Listed Private Sector Gross Block

Listed Private Sector Capex

Source: Bloomberg, Ace Equity, HSIE Research

Source: Bloomberg, Ace Equity, HSIE Research

Exhibit 14: Industry specific relative Capex FY22-24

30% IT & Exchanges Appliances

Industry-specific Capex trends

The metals industry is adding a profound quantum of Capex over the

Source: Bloomberg, Ace Equity, HSIE Research

Construction and capacity additions cannot happen without cement. The

Source: Bloomberg, Ace Equity, HSIE Research

India is expected to be emphasised in a post-pandemic world. Capex spends in

Source: Bloomberg, Ace Equity, HSIE Research

lower % of company OCF. This downward trend yields a positive interpretation

Exhibit 22: Textiles

Source: Bloomberg, Ace Equity, HSIE Research

Exhibit 23: Appliances

Similar to the consumer discretionary industry, the appliances industry will

600 Manufacturing of Pharmaceutical Drugs

0 Telecom & Networking Products

Mfg of Medical Devices

Unlisted Private Sector

Exhibit 26: Industry-wise split of Capex in FY20

Source: VCC Edge, HSIE Research

Exhibit 27: Contribution of unlisted space in total industry Capex in FY20

Source: VCC Edge, HSIE Research

State-wise distribution of private sector Capex

Source: CMIE, HSIE Research

Government sector Capex

Source: MoSPI, HSIE Research

Financing of Capex: As revenue collection of central government is a major

Indian logistics market

Source: Indian Railways

Roads and bridges

10% Rural roads

Source: MoRTH, NHAI

The ministry of road transport & highways (MoRTH) is responsible for

Exhibit 38: Financing of above projects is expected to be done in below

Source: HSIE Research, MOSPI Source: Source: HSIE Research, MOSPI

Special focus on the north east

Financing and budget allocation trend

Source: MoRTH, Union budget

 Freight volumes: Freight is the major revenue-earning segment of IR. It

Source: Indian Railways, HSIE Research

Source: Indian Railways, HSIE Research

Railway’s share in logistics market

It can be clearly observed that freight basket of IR is heavily skewed in

Exhibit 46: Rail share in share

Further, in the chart below depicting commodity-wise growth of rail cargo, it

Exhibit 48: Commodity wise rail cargo growth (MT)