Private Capital Expenditure Remains Weak Among Unlisted Firms, Accounting for the Majority of Investment Spending: ICRA

Government Infrastructure Spending Rises, Private Investment Remains Uneven

Government infrastructure spending has seen a significant increase of 11-12% in key sectors such as roads, railways, power, and defence, according to recent budgetary allocations. However, private investment activity remains uneven, according to ICRA.

Speaking at the Moody's and ICRA credit ratings event in Mumbai, K Ravichandran, Executive Vice President and Chief Ratings Officer (CRO) at ICRA, highlighted a clear divide in capital expenditure plans between listed conglomerates and the broader universe of unlisted companies. While large listed conglomerates are actively pursuing projects in areas such as green hydrogen, battery storage, and data centres, unlisted companies (which account for about 85% of overall private-sector capex) continue to remain cautious.

The reasons cited for this caution include weak exports, import competition, adequate existing capacity in several sectors, and subdued demand for fresh capacity creation. This uneven pattern was a recurring theme in discussions on corporate credit outlook and investment trends for FY27.

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Ravichandran explained that private capex is not a one-size-fits-all kind of scenario right now, but is highly uneven. He noted that traditional sectors are expanding cautiously while newer areas such as renewables, data centres, and hospitality are seeing stronger momentum.

However, can this selective momentum among listed players broaden into a fuller private capex cycle? To answer this, Ravichandran noted that capacity utilisation needs to rise meaningfully and consumption demand must recover before unlisted firms ramp up spending.

For listed companies, this divergence suggests differentiated outcomes. Firms with strong balance sheets executing in renewables, data centres, and related areas may benefit from project progress and potentially supportive credit metrics. Traditional sectors facing slower private investment momentum could see more measured performance in the near term.

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Government capex in core infrastructure areas is expected to proceed despite concerns around higher oil prices and potential fiscal pressures. At the same time, private capex is showing selective momentum in sunrise sectors linked to energy transition and digital infrastructure.

Questions were raised on how quickly this selective private spending can broaden. Sustained capacity utilisation above certain thresholds and clearer demand recovery, particularly in consumption, would be important for a wider capex cycle.

On the corporate credit side, ICRA indicated that balance sheets remain generally resilient, though the agency is watching how input cost pressures from global uncertainties could affect leverage metrics in capex-intensive sectors.

Broader themes such as consumption, banking, and global factors were also discussed. Ravichandran highlighted that recovery has been mixed, with premium segments showing relatively better traction while mass-market and rural demand remains subdued. Although sustained weakness in consumption could delay a broader private capex cycle.

ICRA expects bank credit growth to moderate to 11-11.7% in FY27 from 15.6-15.9% in FY26. The agency retained a stable outlook on the banking sector, citing comfortable capitalisation and manageable asset quality risks.

Moody's has cut India's FY27 GDP growth forecast to 6% citing subdued private consumption, weaker industrial activity, and moderation in capital expenditure momentum amid elevated input costs due to the conflict. ICRA similarly flagged that the ongoing West Asia conflict has led to a surge in energy prices, which could hurt corporate profitability and impact consumer demand.