INSUBCONTINENT EXCLUSIVE:
The capital expenditure target for fiscal 2023 now stands at Rs 7.5 lakh crore.In the Budget 2022 speech, Finance Minister Nirmala
expenditure target for fiscal 2023 now stands at Rs 7.5 lakh crore.Sitharaman said capital investment holds the key to India's revival and
public spending is required to take the lead.Capital expenditure (capex) is nothing but funds used by a company to acquire, upgrade, and
maintain physical assets such as property, plants, buildings, technology, or equipment.Ever since the government's higher capex was
announced, companies with high capital expenditure, in the capital goods and infra sector, are in focus.Why?Tracking a company's capex
plans give an idea about the growth momentum, one must also look at the demand for the company's products and the funding of capex plans
along with past performance.If it's taking on huge debt for capex, it's clearly a red flag.In today's article, we take a look at
companies which have undertaken big capex plans and are nearing completion.These companies are in high growth sectors and have potential to
increase their topline due to the capex.#1 Laurus LabsLaurus Labs is engaged in offering a broad and integrated portfolio of Active
Pharmaceuticals Ingredients (API) including intermediates, generic finished dosage forms (FDF) and contract research services to cater to
the needs of the global pharma industry.The company has various state-of-the-art manufacturing facilities that enable it to develop quality
affordable medicines for challenging diseases.The company has seven manufacturing facilities in Visakhapatnam (Andhra Pradesh), one API
facility in Bibinagar (near Hyderabad), and a Kilo Lab at its R-D centre in Hyderabad.Last week, the company posted good December 2021
quarter results with all segments continuing to show strength
While API segment revenues were up 88%, formulations registered 61% year on year growth.In order to supplement future growth, Laurus Labs
undertook capex of Rs 700 crore in fiscal 2021
This was done to increase capacity by almost two times by March 2022.The company recently announced a capex of Rs 1,500-1,700 crore spread
over the next two years i.e
until 2023 to further increase its capacities.Have a look at the image below which shows the company's capex plans.Most of the capex which
the company did in fiscal 2022 is for growth in fiscal 2023 and beyond, according to Dr Satyanarayana Chava, founder of Laurus Labs.Note
that Laurus Labs has set a revenue target of $1 billion by 2023 which it aims to achieve via this expansion
It expects growth to sustain in formulations aided by new approvals and steady growth in custom synthesis.#2 Borosil RenewablesBorosil
Renewables is engaged in the business of manufacturing of extra clear patterned glass and low iron solar glass for application in
photovoltaic panels, flat plate collectors, and green houses.It's the first and only solar glass manufacturer in India.Last year, the
company undertook capex expansion worth Rs 500 crore to double its solar panel glass capacity
Currently, it has a 450-tonne per day capacity at its Baruch plant, which is expected to increase to a capacity of 950 tonnes per day in
July 2022.Notably, this is Borosil's second doubling of its capacity in the past five years
It undertook Rs 240 crore expansion in 2016.For this capex, it successful raised funds (Rs 200 crore) via QIP back in December 2020.Note
that Borosil Renewables spotted the opportunity in the segment quite early back in 2008 and commissioned its solar glass manufacturing
While many saw the growth potential, the company was in for a very tumultuous decade as can be seen from its stock price chart above.Here's
Pradeep Kheruka, the company's Chairman in his own words.China started to dump material into India at prices much lower than the cost of
It was impossible to stand up against Chinese competition initially.The company is set to benefit more as the government in Budget 2022
announced a proposal to include solar module manufacturers in the performance linked incentives (PLI) scheme.An additional Rs 19,500 crore
will be allocated to the scheme, which aims to promote manufacturing of high-efficiency modules with priority to fully integrate
manufacturing units to solar PV modules.To know more, check out Borosil Renewables latest quarterly results.#3 HikalHikal is a partner to
companies in the pharma, crop protection, and specialty chemicals industry
from the China+1 strategy, it's also enthused by recent opportunities arising from global supply chain disruption
Due to this, Hikal has planned a much higher capex program.At present, Hikal is executing a nearly Rs 600 crore capex program
While parts of the program will be completed over the next few months, a major part of the benefit is expected to come in fiscal 2024.This
capex is to scale up its pharma and crop protection business (contract manufacturing and proprietary products).What's more, the company
has also culminated a 10-year contract in the emerging vertical of the animal health business.Hikal has a strong product profile and good
relationships with leading multinational pharma as well as agro-chemical (crop protection segment) companies in the world
revenues from the sale of Gabapentin API
It continues to maintain its global market leader position, with around 35-40% market share in Gabapentin.Over the last one year, shares of
the company have gained 140%.Stock of the company came under selling pressure recently following the tragic Surat gas leak incident in which
six people lost their lives.Reports stated that the industrial chemical leaked was allegedly collected from Hikal in Taloja of Maharashtra
However, the company's management clarified the leak did not come from the tanker that was from Hikal.#4 Alkyl Amines ChemicalsAlkyl
Amines Chemicals is a leading manufacturer of amines chemicals which find applications across pharma, agrichem, personal care, polymers,
amines, amines derivatives, and specialty chemicals
It holds a strong market share of 40-50% on an average across all the products.The company has been continuously adding new products and
capacities to meet the growing demand for its products.In 2018, the company commissioned a new methylamine plant at Dahej
It increased its capacity utilisation which helped it to increase market share in methylamines significantly.Then in 2020, the company
enhancements to meet demand.With a growing demand for its products, the company's board recently approved an investment of approximately
Rs 350 crore for increasing the capacity for aliphatic amines by 30-40% at its Kurkumbh and Patalganga sites in Maharashtra.The capacity
will be added in the next 15 to 18 months and will contribute significantly to the company's topline.Note that in the last one decade, the
company has multiplied its topline and operating profits by 14 times and 65 times, respectively.And Mr Market has not left all these efforts
The stock of Alkyl Amines is one of the biggest wealth creators of the past decade.The stock is likely to be in focus for the next few
months as Finance Minister Nirmala Sitharaman recently announced changes in customs duty for the sector.As per market experts, the custom
duty cut in methanol is a big positive for amine stocks like Alkyl Amines, which use the chemical as their main raw material.#5 Tata
ChemicalsTata Chemicals is part of the Tata Group
producer of soda ash in the world with presence across the globe
It is also the sixth largest manufacturer of sodium bicarbonate in the world.It also has an established market presence in the agri science
- crop protection business through its subsidiary Rallis India, another hidden Tata group company.Tata Chemicals has allocated Rs 2,400
crore towards capacity expansion projects at its Mithapur plant
Of this, around Rs 800 crore has been spent and the rest will be incurred over the next one year.Have a look at the image below which shows
Tata Chemicals' capex projects.Apart from this, the Tata group company has big expansion plans for lithium-ion cells for electric vehicles
(EV), chemicals, nutritionals, and agri-sciences.Did Budget 2022 set the revival of capex in motion?Note that the higher allocation in
That's massive.The last time the share of capex touched a similar figure was when it came in at 19.3% for the financial year 2005.The
economic survey released a day before the budget did highlight that capex had earlier been affected by restrictions and labour availability
This has changed now as restrictions eased in the second half of the financial year 2021 and the momentum has continued in fiscal 2022
too.Many companies have planned huge capex plans over the next three years starting 2022
This just shows that there will be a strong recovery.Research Analyst at Equitymaster, Aditya Vora believes the Budget 2022 shows the clear
thrust on reviving private sector capex.This is a strong push for the capital goods sector thus benefitting old economy like cement and
As per Aditya, private capex could be the next trigger for the economy.Here's what he wrote in a recent editorial:Outlay for capital
expenditure was raised by 35% from Rs 5.5 trillion to Rs 7.5 trillion
Out of the Rs 7.5 trillion capex, 25% is for roads and highways while defence will get 21%.What does this mean for the markets?To put it
simply, the 2003-2008 period for capital goods and infrastructure is ahead of us.If the last couple of years was about public capex done by
the government, the next couple of years are likely to be led by private capex.You can play the private capex cycle indirectly by investing
in steel and cement companies.Think of the additional cement and steel required to build roads, highways, hospitals, and buildings.While the
tide will be towards tech stocks and new age IPOs, I believe companies in the infrastructure, capital goods should be looked at.Disclaimer:
This article is for information purposes only
been edited by TheIndianSubcontinent staff and is auto-generated from a syndicated feed.)
