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MUMBAI : Capital expenditure by India’s private sector ay take one to two years to recover as companies remain cautious amid the global uncertainty, a top Bank of America (BofA) executive said.

“At the start of the year, we were optimistic given the general sentiments around private capex coming back," Bank of America’s head of corporate banking in India Shankar Subramaniam said." But in my opinion, the war in Ukraine put a dampener and subsequent action from the Fed further exacerbated it. So, the majority of our clients have moved to a wait-and-watch mode. At present, the capacity utilization is around 60-70% and in my opinion, clients will await some stabilization in the market before formalising any capex plans. Interestingly, we are seeing corporates that we cover planning for capacity expansion almost exclusively on the back of green energy, which is very promising," Subramaniam said in an interview.

Though a conservative financier, BofA expects sectors such as telecom, real estate and power generation to be the main drivers of private capex, which would in turn boost credit growth. As on 21 October, credit growth in India stood at 17.9% year on year, and is expected to be in the range of 15-16% in FY23.

“Telecom is an active space because of 5G rollout. Power generation will continue to see capex with the transition to solar and wind energy. We expect to see continued interest from investors for acquisitions in this space. Real estate is another sector which will see constant requirement for capital. Debt-raising by telecom companies will happen by the first quarter of next year, and over a period of 6-12 months, you will see drawdowns happening," said Subramaniam.

Yet another sector which is seeing a lot of interest for both equity and debt investors is the electric vehicle (EV) space as companies look at aggressive expansion plans.

“Across industries, we are seeing conversations around sustainable linkages being strong...On the EV space, we see a lot of overseas interest from private equity players and even debt to participate in this sector. The sector has seen strong growth and expect all companies to continue investing in expanding their offerings in this space," he added.

ABOUT THE AUTHOR

Gopika Gopakumar

Gopika Gopakumar has worked for over 15 years as a banking journalist across print and television media. Her expertise lies in breaking big corporate stories and producing news based TV shows. She was part of the 2013 IMF Journalism Fellowship Program where she covered the Annual & Spring meetings of the International Monetary Fund in Washington D.C. She started her career with CNBC-TV18, where she also produced a news feature show called Indianomics and an award winning show on business stories from South India called Up South. She joined Mint in 2016.
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