MUMBAI: Large domestic companies like the Tatas, Reliance, Adani, and Vedanta among a few others are planning huge capital commitments to the tune of a whopping $800 billion over the next 10 years, almost triple what they spent in the past decade, says a global rating agency.
"About 40 per cent of domestic conglomerates’ spending over the coming decade will be on new businesses, such as green hydrogen, clean energy, aviation, semiconductors, electric vehicles and data centers. The Tatas, Adani, Reliance, Vedanta and JSW groups alone are prepping about $350 billions of investment in these sectors over the next decade," said S&P Global’s credit analyst Neel Gopalakrishnan in a report.
Many of the other conglomerates will focus more on their established businesses, he said, adding an emphasis on boosting scale and profitability. On the other hand, the Birla, Mahindra, Hinduja, Hero, ITC, Bajaj and the Murugappa groups have a record of conservative growth, for example.
Large domestic companies will likely invest $400-500 billion over the next 10 years in existing businesses, if they continue investing at a similar rate to that seen over the past two years.
"The opportunity for growth is huge. But, the heavy spending on investments also presents many risks such as execution risks, and the risk of borrowing heavily on technology with unproven commercial payoff, such as green hydrogen," he said.
As absolute debt levels rise, companies will need to continuously strengthen their core businesses to maintain their credit profiles. Any underperformance during the investment phase would likely hit credit metrics.