Capital spending by listed companies has been relatively resilient to the “investment rate” in fiscal year 21, hit by the pandemic.
A report from ICICI Securities noted that during the pre-pandemic period of FY20, the “nominal investment rate” fell to 28.8% while the share of “non-financial corporations” in aggregate GFCF (gross fixed capital formation) was relatively low at 46 percent compared to the five-year average (FY15-20) of 48.3 percent.
In the pandemic year of fiscal 21, the “nominal investment rate” fell further to 27.1%, which translates into a 9% drop in GFCF to 53.5 trillion rupees.
However, investments in the publicly traded corporate space were relatively better, with cash spent on ‘tangible fixed assets’ (PPE) declining 6.6 percent year-on-year to 5.1 trillion rupees over the past year. ‘FY21, while including acquisitions and investments in subsidiaries, it was stable year on year at Rs 5.6 trillion, “he said. As a result, the ratio of space investments listed on GFCF improved in FY21 to reach 10.5%.
While the overall capital spending of listed company India Inc has been relatively resilient, the CFO (cash flow from operations) they generated grew sharply by 25% year-on-year to reach 11.9 trillion. rupees in FY21, largely due to cyclical stocks.
“The CFO to investments ratio for India Inc reached a peak of 2.2x in 20 years, which was last achieved towards the start of the previous investment cycle in fiscal year 02-04 and bodes well for future investments as demand and usage levels improve. It said.
The CFO after deducting the interest obligations of 2.1 trillion rupees is still amounted to 1.7x capital expenditure, according to the report. The net result is that the overall debt fell by 1.3 trillion rupees in FY21, impacting the industry’s credit growth and the accumulation of cash and investments at 23. Trillion rupees at the end of fiscal year 21.
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Posted on: Wednesday August 25, 2021 5:43 PM IST