Capital Expenditure as a Growth Engine: Indian Companies Poised for Strong Expansion in the Next Five Years

Capital expenditure (CapEx) is a cornerstone of economic growth, enabling companies to expand capacity, innovate, and capture emerging opportunities. In India, a robust CapEx cycle is underway, driven by government initiatives, private sector participation, and global megatrends like infrastructure development, renewable energy, and digital transformation. With India’s GDP projected to grow at 6.5-7% annually through 2030, companies investing heavily in CapEx are well-positioned to outperform. This blog explores Indian companies likely to achieve strong growth over the next five years, focusing on their CapEx strategies, sectoral tailwinds, and financial discipline. We delve into technical and financial metrics to identify high-potential players in infrastructure, energy, technology, and manufacturing.

The Role of CapEx in India’s Growth Story

CapEx represents investments in long-term assets like factories, equipment, and infrastructure, which drive future revenue and profitability. In India, CapEx has grown significantly, with the central government’s allocation rising to ₹11.11 lakh crore (3.4% of GDP) in FY25, more than doubling from FY19. Private sector CapEx, while lagging, is rebounding, with Fitch Ratings forecasting 10-12% annual growth in FY24-FY25. Gross Fixed Capital Formation (GFCF), a key investment metric, reached 30.8% of GDP in FY24, up from 28.9% in FY15-FY19, reflecting a structural shift toward investment-led growth.

Successful CapEx strategies require alignment with market demand, disciplined execution, and positive net present value (NPV). Companies must navigate risks like rising interest rates, which increase borrowing costs, and execution delays due to regulatory or geopolitical challenges. The Reserve Bank of India (RBI) projects a potential 50-basis-point repo rate cut in FY26, which could lower borrowing costs and spur private investment. With these dynamics in mind, we highlight companies leveraging CapEx to capitalize on India’s growth trajectory.

Key Sectors and Companies Driving CapEx-Led Growth

1. Infrastructure and Capital Goods

India’s infrastructure push, underpinned by the National Infrastructure Pipeline (NIP) and Gati Shakti, is driving CapEx in roads, railways, and urban development. The government’s ₹11.21 lakh crore CapEx target for FY26, a 10.08% increase, signals sustained momentum. Infrastructure companies, particularly in engineering, procurement, and construction (EPC), are set to benefit.

Larsen & Toubro (L&T)

L&T, India’s largest EPC firm, is a linchpin of the infrastructure boom. Its order book grew 23.6% in FY24 and 10.3% in H1 FY25, reflecting strong demand in roads, railways, and green energy projects. L&T’s FY24 revenue rose 15% to ₹2.21 lakh crore, with a projected 17-20% growth in FY25, driven by NIP projects. Its return on equity (ROE) of 14.5% and debt-to-equity ratio of 1.3 indicate financial stability.

CapEx Strategy: L&T’s ₹1.5 lakh crore CapEx plan through FY27 focuses on metro rail, high-speed rail, and renewable energy projects. Investments in digital tools like BIM (Building Information Modeling) enhance project efficiency, reducing cost overruns. With a 3.5-4x order book-to-revenue ratio, L&T offers strong revenue visibility. Its exposure to green hydrogen and data centers aligns with global sustainability trends.

Growth Outlook: Analysts project a 15% CAGR in revenue through 2030, supported by government spending and private sector participation. L&T’s diversified portfolio mitigates risks from sector-specific slowdowns.

UltraTech Cement

UltraTech, India’s largest cement producer, is capitalizing on infrastructure-led demand. Its ₹5,477 crore CapEx in FY22 expanded capacity by 12.8 million tonnes, and it plans ₹20,000 crore through FY27 to reach 200 million tonnes per annum. FY24 revenue grew 10% to ₹70,908 crore, with a 12% EBITDA margin.

CapEx Strategy: UltraTech’s investments target greenfield and brownfield expansions, with a focus on sustainable production (e.g., waste heat recovery systems). The company leverages the Production-Linked Incentive (PLI) scheme to optimize costs. Its 2.5x debt-to-EBITDA ratio is manageable, supported by strong cash flows.

Growth Outlook: With cement demand projected to grow at a 7-8% CAGR through 2030, UltraTech’s scale and efficiency position it for market leadership. Its forward P/E of 25 is justified by consistent earnings growth.

2. Renewable Energy and Power

India’s renewable energy capacity is set to double by 2030, driven by solar, wind, and green hydrogen. The government’s ₹7,453 crore PLI scheme for solar manufacturing and ₹19,500 crore for green hydrogen incentivize private CapEx. Power demand, fueled by data centers and EVs, is growing at 6% annually.

Reliance Industries (RIL)

RIL, India’s largest conglomerate, is pivoting to clean energy with a ₹10 lakh crore CapEx plan through 2030. Its New Energy business aims to achieve 100 GW of renewable capacity, with ₹75,000 crore allocated to solar and wind projects. RIL’s FY24 CapEx was ₹1.3 lakh crore, the highest among Indian corporates, with a 14% YoY increase.

CapEx Strategy: RIL’s investments include a 20 GW solar manufacturing facility in Jamnagar and green hydrogen production. Its integrated approach—spanning generation, storage, and distribution—reduces costs. RIL’s debt-to-equity ratio of 0.7 and AAA credit rating ensure funding flexibility.

Growth Outlook: Analysts forecast RIL’s renewable segment to contribute 20% of EBITDA by 2030, with a 12% CAGR in consolidated revenue. Its diversified portfolio (telecom, retail, oil) hedges against energy transition risks.

Adani Green Energy

Adani Green, India’s largest renewable energy company, targets 50 GW of capacity by 2030. Its FY24 CapEx of ₹30,000 crore supported 10 GW of new solar and wind projects. Revenue grew 33% to ₹9,240 crore, with an EBITDA margin of 90%, reflecting operational efficiency.

CapEx Strategy: Adani Green’s CapEx focuses on utility-scale solar parks and hybrid projects, leveraging economies of scale. Its 25-year power purchase agreements (PPAs) ensure stable cash flows. Despite a high debt-to-equity ratio of 2.5, its 1.8x debt service coverage ratio indicates repayment capacity.

Growth Outlook: With a 25% CAGR in capacity addition, Adani Green is poised to dominate India’s renewable market. Its forward P/E of 40 reflects premium valuations, but growth justifies the premium.

3. Technology and Telecom

India’s digital economy is projected to reach $1 trillion by 2030, driven by 5G, cloud computing, and data centers. Telecom and IT companies are investing heavily in infrastructure to meet surging data demand.

Bharti Airtel

Airtel, India’s second-largest telecom operator, spent ₹26,541 crore on CapEx in FY22 to expand 5G and fiber networks. Its FY24 revenue grew 12% to ₹1,49,982 crore, with a 20% EBITDA margin. Airtel’s 5G rollout covers 90% of India’s population, driving ARPU (average revenue per user) growth.

CapEx Strategy: Airtel’s ₹75,000 crore CapEx through FY27 targets 5G spectrum, data centers, and rural connectivity. Its network slicing technology optimizes 5G for enterprise use cases like IoT and smart manufacturing. A debt-to-EBITDA ratio of 2.8 is sustainable, given strong cash flows.

Growth Outlook: With a projected 15% CAGR in data traffic and 8% in ARPU through 2030, Airtel is a key beneficiary of India’s digital boom. Its forward P/E of 22 offers value relative to growth.

Tata Consultancy Services (TCS)

TCS, India’s largest IT services firm, is investing in AI, cloud, and cybersecurity. Its FY24 CapEx of ₹5,000 crore supported data centers and R&D labs. Revenue grew 7% to ₹2,40,893 crore, with a 25% EBITDA margin and 20% ROE.

CapEx Strategy: TCS’s investments focus on AI platforms like Ignio and cloud migration services. Its low debt-to-equity ratio of 0.1 and ₹44,000 crore cash reserve enable flexible CapEx. Partnerships with hyperscalers (AWS, Azure) enhance its cloud offerings.

Growth Outlook: With a 10% CAGR in digital services demand, TCS is well-positioned for steady growth. Its forward P/E of 30 is reasonable given its margin resilience and global client base.

4. Manufacturing and Metals

The PLI scheme, covering sectors like electronics, auto components, and steel, is spurring manufacturing CapEx. India’s ambition to become a global manufacturing hub, supported by the “China+1” strategy, drives investment.

JSW Steel

JSW Steel, India’s leading steel producer, plans ₹20,000 crore in CapEx for FY25 to expand capacity to 50 million tonnes by 2030. FY24 revenue grew 10% to ₹1,75,000 crore, with a 12% EBITDA margin. Its order book reflects strong demand from infrastructure and automotive sectors.

CapEx Strategy: JSW’s investments target greenfield plants and decarbonization technologies like electric arc furnaces. The PLI scheme and export growth (high-value steel products) enhance profitability. Its 2x debt-to-EBITDA ratio is manageable, supported by rising steel prices.

Growth Outlook: With a 7% CAGR in steel demand, JSW is poised for robust growth. Its forward P/E of 15 offers value in a cyclical sector.

Dixon Technologies

Dixon, a leading electronics manufacturer, benefits from the PLI scheme for mobile phones and components. Its FY24 CapEx of ₹1,500 crore expanded capacity for smartphones and LEDs. Revenue grew 40% to ₹17,691 crore, with a 5% EBITDA margin.

CapEx Strategy: Dixon’s investments focus on backward integration (e.g., PCB manufacturing) and export-oriented units. Its 1.5x debt-to-equity ratio and 25% ROE reflect financial discipline.

Growth Outlook: With a 20% CAGR in India’s electronics market, Dixon’s scalable model positions it for strong growth. Its forward P/E of 50 reflects high expectations but is supported by earnings momentum.

Risks and Challenges

High CapEx entails risks, including execution delays, cost overruns, and macroeconomic headwinds. India’s FY25 CapEx slowdown (-12.3% YoY in April-November) due to elections and monsoon disruptions highlights execution challenges. Rising interest rates could increase borrowing costs, particularly for debt-heavy firms. Geopolitical uncertainties, such as U.S. tariff policies, may impact export-oriented sectors like steel and electronics. Companies must maintain strong balance sheets and align CapEx with demand cycles to mitigate risks.

Additionally, private sector CapEx remains subdued, with FY24 spending at ₹9.4 trillion, slightly below FY23. Sectors like healthcare and retail have seen sharp declines, underscoring uneven recovery. Investors should focus on companies with diversified revenue streams, high ROE, and manageable leverage.

Conclusion: Investing in India’s CapEx Boom

India’s CapEx cycle, driven by government spending and private sector revival, offers a compelling opportunity for investors. Larsen & Toubro and UltraTech Cement are poised to dominate infrastructure, while Reliance Industries and Adani Green lead the renewable energy transition. Bharti Airtel and TCS are capitalizing on digital transformation, and JSW Steel and Dixon Technologies are riding manufacturing tailwinds. These companies combine strategic CapEx, strong financials, and exposure to high-growth sectors, positioning them for robust growth through 2030.

Investors should prioritize firms with disciplined CapEx execution, positive NPV projects, and alignment with policy incentives like PLI. While risks like interest rate hikes and geopolitical tensions persist, India’s structural growth drivers—demographic dividends, urbanization, and digitalization—create a fertile ground for CapEx-led expansion. By focusing on fundamentals and long-term trends, investors can capture the upside of India’s economic ascent.

Disclaimer: This blog is for informational purposes only and not investment advice. Conduct thorough research before investing. Past performance does not guarantee future results.

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Sources:

• Economic Times: Budget 2025 CapEx Target
• Fitch Ratings: Indian Corporate CapEx Growth
• Business Standard: Corporate CapEx Trends
• Wright Research: India’s CapEx Revival
• Financial Express: Top 100 Firms’ FY22 CapEx
• Deloitte Insights: India Economic Outlook
• Jefferies: India’s Growth Drivers
• RBI Reports and Economic Survey 2024-25