India will see a decade of mahotsav capex: Kumar Mangalam Birla

The problem of dual balance sheets of distressed loans and overleveraged companies is far behind and the next decade will see an increase in capital spending in many sectors, wrote Aditya Birla Group Chairman Kumar Mangalam Birla.

“I believe we have ahead of us a next decade of Capex Mahotsav in India,” Birla wrote in a LinkedIn note titled “My 2021-2022 Reflection.”

Birla said that in India, a generation of entrepreneurs are now benefiting from economic reforms as deep as those of 1991.

1991 is the year when some of the important policy initiatives were introduced in the budget to correct the fiscal imbalance, such as the reduction of fertilizer subsidies, the abolition of sugar subsidies, the divestment of part of the government’s shareholdings in some public sector companies. “The private sector also pulls on two engines, the conventional economy and the new economy. I call it dual engine growth,” Birla said.

Investors are excited about the prospects for growth in key sectors as well as booming sectors…the word booming sector applies to the entire Indian landscape, which includes both conventional sectors like cement, steel, electricity and automotive and emerging areas like digital and renewable energy, says Birla.

Whiplash effects kicked in, with shortages of modest $1 semiconductors in Taiwan and a fire at a lithography factory in Berlin, lengthening queues for eager new-car buyers in India , did he declare.

“In posts reminiscent of the licensing era, hopeful car aspirants are now placed on long waiting lists as companies scramble to ramp up production,” Birla said, adding that these effects boost challenged a decades-long evolution toward increased efficiency and finely tuned precision operations that maximized operating costs but removed the margin for error.

Birla said the world is full of capital and now is the best time to be an entrepreneur. “Competition for investment opportunities and fear of missing out (FOMO) have driven the valuations of many fledgling companies to stratospheric levels,” he said.

Several companies that have gone public in recent times have seen their valuations soar. Zomato, for example, a food delivery company, listed its shares on Indian stock exchanges. Its IPO was oversubscribed 35 times, earning it a valuation of $12 billion.

Birla said “reliable old concepts” such as cash flow and gross margins will help bolster valuations going forward. “Old reliable concepts like cash flow and gross margins will guide behavior and actions. The only lasting divide is one based on intellect. Great waves of cheap capital will eventually erode all other barriers to entrance,” he said.

Business valuation and longevity will follow automatically, he said.

“From the experience of Aditya Birla Group in several businesses, in several geographies, I can say that in the long term, sustainable and successful businesses are those that generate tangible profits, prosperity, livelihoods quarter after quarter,” Birla said.

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