India Inc's big plans, big money and the risks

03 October 2006

Large Indian companies have come out with mega investment plans in recent months. How realistic are these plans and where is the money going to come from? By Rex Mathew

Should we feel excited or worry when the Indian corporate sector announces fresh industrial investments, the aggregate of which exceeds the GDP of many medium sized countries? Do we take it as a sign of the rising confidence of India Inc or call it 'irrational exuberance'?

Aggregate investments announced by large companies in recent months exceed Rs7 lakh crore or $150 billion. That is huge even by global standards. In some cases, the investments being planned are more than the current revenues of the companies announcing them. Are these companies really serious? If they are, do they have the money to walk the talk?

Big Plans
Among the large Indian corporate groups, the Tata Group and Reliance have the most ambitious plans. Last month, the Tata Group said it is looking at investing Rs1.2 lakh crore, or more than $25 billion, over the next three or four years in new projects. The Bulk of its investments will be in steel, followed by power, telecom, FMCG, automobiles and IT.

On the other hand, the aggressive Mukesh Ambani's Reliance Industries has announced plans to spend around Rs27,000 crore, or close to $6 billion, in a new oil refinery and around $10 billion (not yet confirmed) in the proposed mega township in Navi Mumbai. The company's retail foray would require Rs25,000 crore while oil & gas exploration and petrochemicals expansion would see investments of at least Rs20,000 crore.