MUMBAI — Indian companies have announced investments of over INR 32 lakh crore during the first nine months (April-December) of the current financial year, which represents a 39 per cent jump compared to the corresponding figure of INR 23 lakh crore for the same period of the previous financial year, according to a State Bank of India (SBI) report.
A strong pipeline of INR 13.63 lakh crore in work-in-progress capital, as of March 2024, reflects a strong growth momentum in the coming years, the report states.
Government investment reached 4.1 per cent of gross domestic product (GDP) in FY23, the highest since FY12 while private sector investment as a share of GDP touched 11.9 per cent, which is the highest since FY16. Preliminary FY24 data, expected by the end of February, is likely to show private investment nearing 12.5 per cent of GDP.
Meanwhile, external commercial borrowings (ECBs) remain a key funding source for Indian companies, with outstanding ECBs at $190.4 billion as of September 2024, a slight increase from the previous quarters.
Non-rupee and non-FDI components account for $155 billion, offering stability due to lower volatility from hedging. Private companies hold 63 per cent ($97.58 billion) of these borrowings, with 74 per cent of their exposure hedged.
Private companies held around 63 per cent ($97.58 billion) of these borrowings, while public sector companies accounted for the remaining 37 per cent ($55.5 billion). Private firms demonstrated stronger hedging practices, covering about 74 per cent of their exposure. They brought the overall hedging ratio for non-rupee-non-FDI ECBs to approximately 68 per cent, according to the report.
The practice of hedging has been on the rise with two-thirds of the total ECBs being hedged as of September 2024, up from 55 per cent two years ago.
Among the unhedged portion, some are backed by government guarantees, while others benefit from natural hedges, where borrowers earn in foreign currency. As of September 2024, natural hedges accounted for around 1.5 per cent of unhedged ECBs, the report added.