Indian conglomerates are all set for a significant investment wave, with capital investments projected to hit $800 billion in the next 10 years, almost triple what they spent over the prior decade, according to an analysis. 

In its latest report, global credit rating agency S&P global said that conglomerates will likely invest about $400 billion to $500 billion over the next 10 years in existing businesses, if they continue investing at a similar rate as that seen over the past two years. 

Investments in New Business Segments

According to the US-based agency, almost 40 percent of investments that will be made by Indian conglomerates over the next decade will be on new businesses like aviation and green energy. 

"About 40% of Indian conglomerates' spending over the coming decade will be on new businesses, such as green hydrogen, clean energy, aviation, semiconductors, electric vehicles and data centers. The Vedanta, Tata, Adani, Reliance and JSW groups alone are prepping about US$350 billion of investment in these sectors over the next decade," said Neel Gopalakrishnan., credit analyst at S&P Global Ratings. 

The credit rating agency projected that conglomerates including Birla, Mahindra, Hinduja, Hero, ITC, Bajaj and the Murugappa will focus more on their established businesses, in our view, with an emphasis on boosting scale and profitability as they have a strong track record of conservative growth. 

"The opportunity for growth for Indian conglomerates is huge. But the heavy spending on investment also presents risk--execution risk, and the risk of borrowing heavily on technology with unproven commercial payoff, such as green hydrogen," said Gopalakrishnan. 

The report added that firms will need to continuously strengthen their core businesses to maintain their credit profiles, and noted that a possible underperformance during the investment phase would likely hit credit metrics. 

India's Business Sector Steady

The recent HSBC Purchasing Managers' Index report compiled by S&P global revealed that business actitivity in India maintained its momentum in September, with the country's PMI hitting 59.3, marginally down from 60.7 in August. 

According to S&P Global, any PMI reading 50.0 signals an expansion of business activities, while below 50.0 indicates contraction. 

The report also added that employment continued to rise solidly amid improved business confidence among companies in September. 

The survey revealed that companies in India remained strongly optimistic that business activities will increase over the coming year.