How India’s Core Sectors are Fuelling the Next Wave of Growth

The Indian economy is on an upward trajectory, and core sectors are leading the charge. These sectors, producing essential materials like steel, cement, power, and fertilizer, are witnessing significant capital expenditure (capex) plans, indicating a positive outlook for industrial activity. This surge in capex is being driven by a combination of factors, including government initiatives, rising demand, and improving capacity utilization rates.

The capex push is being further supported by rising capacity utilization rates. The trailing capacity utilization rate, a crucial metric published by the RBI, is nearing the critical 75% mark. This signifies that companies are operating closer to their full potential, laying the groundwork for further expansion.

Power Sector: Gearing Up for a Greener Future

The Indian government has set an ambitious target of doubling power generation capacity to 900 GW by 2030, with a significant portion to come from renewable energy (RE) sources. To achieve this goal, the government has implemented favorable policies, including a Rs 3 lakh crore power package announced in the FY21 budget. This package aims to improve credit metrics at discoms, ensure better tariff visibility, and facilitate project financing.

The current RE capacity in India stands at 44% of the total 442 GW. Notably, for the first time, thermal power’s share in installed capacity dipped below 50% in May 2024. This shift reflects the growing importance of renewable energy sources.

NTPC Leading the Charge

NTPC, India’s largest power producer, is at the forefront of this clean energy transition. The company plans to add 60% more capacity in the medium term, with a significant focus on RE. NTPC’s current RE capacity of 3.6 GW is set to grow considerably with an additional 8.4 GW under construction and 11.2 GW in the tendering process. The company also has plans to list its RE subsidiary with a fresh issue-based IPO, potentially unlocking further capital for its green ambitions.

Adani Green: Turbocharging Renewable Energy

Adani Green, a leader in the renewable energy space, is another key player driving the sector’s growth. The company has witnessed a 25% increase in its existing capacity in FY24, reaching 10.9 GW. With ambitious plans to add 6 GW in FY25 and achieve a total capacity of 50 GW by 2030, Adani Green is well-positioned to be a major contributor to India’s renewable energy goals.

Power Grid: Strengthening the Transmission Network

To keep pace with the rising power generation capacity, Power Grid, India’s leading power transmission company, is also ramping up its capex plans. The company aims to invest Rs 2 lakh crore by FY32 to strengthen the transmission network. With ongoing projects worth Rs 86,700 crore and plans to double its capital expenditure rate to Rs 15,000 crore per year from FY25, Power Grid is ensuring a robust infrastructure for seamless power transmission.

Steel and Cement: Buoyed by Infrastructure Growth

The growth in steel and cement demand is primarily driven by the anticipated rise in infrastructure development. The government’s National Infrastructure Pipeline projects of USD 1.2 trillion, along with initiatives focused on highway construction, railway upgrades, and affordable housing, are expected to create significant demand for these essential materials.

Steel Industry Ramps Up Production

Steel consumption in India has witnessed a significant rise, reaching 136 mtpa in FY24, and is expected to propel further industry expansion. Leading steel manufacturers like Jindal Steel and Power (JSP) are investing heavily to increase capacity. JSP plans to invest Rs 7,500-10,000 crore per year over the next two to three years, aiming to reach a capacity of 15.9 mtpa by 2030. Additionally, the company is focusing on improving its product

Conclusion

With substantial investments in power, steel, and cement and keeping in mind capacity expansions, strong demand, and policy support these sectors are gearing up to meet rising demand and support broad infrastructure development. Companies like NTPC, Adani Green, Power Grid, Jindal Steel, and others are leading this charge with ambitious expansion plans and a strong focus on renewable energy and capacity enhancement. As the economy continues to grow and industrial activity intensifies, these stocks warrant close attention for their robust growth potential and significant contributions to India’s infrastructure growth.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. The information is based on various secondary sources on the internet and is subject to change. Please consult with a financial expert before making investment decisions.