Mukesh Ambani has driven 45% of India Inc's capex since FY14

Mukesh Ambani
Even as economists and analysts lament the delay in the private sector capital expenditure (capex) cycle, Mukesh Ambani-owned Reliance Industries (RIL) has emerged as the single-largest corporate investor. 

The Mumbai-based energy to telecom giant accounts for nearly 45 per cent all incremental capital expenditure by top listed companies in the last three financial years. 

The company has cumulatively invested around Rs 2.9 lakh crore in the last three years, against a combined capex of around Rs 6.53 lakh crore by all listed companies since FY14. 

This includes the amount invested in projects under implementation. RIL’s investment is nearly three times the combined capex by the next five largest family-owned business groups in the period — Tata, Aditya Birla, Mahindra, Bharti, and Vedanta. These five groups together made fresh investments (in fixed capital) of Rs 95,000 crore between FY14 and FY17. 

RIL’s capex is also more than two and a half times the combined capex by all listed non-financial central public sector companies during the period.

In comparison, the company accounted for only four per cent of Corporate India’s combined capex worth Rs 12.1 lakh crore in the preceding three-year period (FY11 to FY14). In all, RIL’s fixed assets are up 125 per cent in the last three years, against 19 per cent growth for the entire sample and 12 per cent growth reported by Tata group companies during the period.

RIL’s numbers include the figures for Reliance Industrial Infrastructure, which is very small and its revenue and assets are not even one per cent of the group flagship.

Analysts attribute the capex surge by RIL to its large investment in the telecom venture (Reliance Jio) and expansion at its petrochemicals (petchem) divisions. “It could just be a coincidence that the roll-out of Reliance Jio services and expansion at its refining and petchem division occurred at the time when the rest of Corporate India is on capex holiday, either due to their stretched balance sheets or a poor industrial and demand growth in the country,” says G Chokkalingam, founder and managing director, Equinomics Research & Advisory.

The company had made a fresh investment of Rs 1.6 lakh crore, Rs 67,000 crore, and Rs 53,000 crore in its telecom, refining, and petchem divisions, respectively, in the last three years. 

RIL’s capex has grown at a compound annual growth rate (CAGR) of 31 per cent, from Rs 2.33 lakh crore at the end of FY14 to Rs 5.24 lakh crore at the end of March this year. In the same period, the combined capex by all listed companies grew at a CAGR of six per cent and the growth drops to 3.6 per cent for the sample excluding RIL.

For example, the Tata group’s capex grew at a CAGR of 3.8 per cent, while the Aditya Birla group’s grew at 6.2 per cent a year during the period. Interestingly, the Tata group still leads the charts in the private sector in terms of revenues, profits, and market capitalisation, followed by RIL and Aditya Birla group companies. 

The analysis is based on the annual audited balance sheets of a common sample of 774 non-financial companies that are part of the BSE 500, BSE MidCap and BSE SmallCap indices. 

To avoid double-counting, the numbers have been adjusted for listed subsidiaries of various holding companies such as Grasim Industries, Oil and Natural Gas Corporation, Larsen & Toubro (L&T), and Mahindra & Mahindra (M&M), among others. The numbers have also been adjusted for listed subsidiaries with operations in non-banking financial space such as M&M Financial Services and L&T Finance Holdings. Fixed assets are defined as gross block minus accumulated depreciation and write-off plus capital works in progress (projects under implementation). Thanks to the recent surge, RIL now owns the largest chunk of fixed assets in India Inc ahead of Tata group. At the end of FY17, RIL had fixed assets worth Rs 5.24 lakh crore, against Tata group’s (listed companies) combined fixed assets of Rs 3.47 lakh crore at the end of March 2017. 

Tatas had overtaken RIL in FY11 after a spate of overseas mergers and acquisitions that greatly expanded the balance sheet of key group companies such as Tata Steel and Tata Motors. 

The group is now focused on turning around the financial fortunes of key group companies such as Tata Steel, Tata Power, Indian Hotels, and Tata Chemicals, among others.

Experts say that it is not fair to compare RIL’s capex plans with other business groups due to a huge difference in their business portfolio. “RIL owns three of the most capital-intensive businesses in India – crude oil refining, petchem, and telecom. As such, every additional rupee of revenue requires greater capex by RIL, compared to the rest of the private sector,” says Chokkalingam.

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