Private capex already picking up in India: Prashant Jain of 3P Investments

Prashant Jain of 3PInvestments said that corporate leverage in India is at a ten-year low, non-performing assets (NPAs) are hardly present, corporate profitability is broad based.

Private capex is already picking up in India because order books and order backlogs of engineering companies have been growing at a fairly decent pace, said Prashant Jain, of 3P Investments in a conversation with Moneycontrol.

His comments come after Finance Minister Nirmala Sitharaman indicated a scaling up of private capex this year. Presenting the Interim Budget on February 1, Sitharaman said that the government's market borrowings will be less than what it was in FY24 that that will help private investments that are "happening at scale".

In the interaction, which happened post budget, Jain said that corporate leverage in India is at a ten-year low, non-performing assets (NPAs) are hardly present, corporate profitability is broad based, and the government has played a supportive role in domestic manufacturing through the Make in India vision and production-linked incentives.  With all this, India is emerging as a viable destination for global manufacturing companies, he said.

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The Interim Budget proposed to raise capital expenditure—for the fourth consecutive year—but at a lower pace when compared to the previous years. In FY25, capex is expected to go up by 11.1 percent to Rs 11.11 lakh crore, which is a much lower than FY24 Budget's capex growth of 33 percent YoY.

The finance minister indicated that the government's capex push would remain and added that, with the current government's continuity and picking up of private capex, there will be a multiplier effect in the economy.

What's next

In his conversation with Moneycontrol, Jain advocated caution.

"Investors should tone down their expectations, as the risk reward currently is not great," he said. Jain added that some industrial companies are trading at 40-60x PE and investors should not pick them unless they see sustained growth in the company. He cited an example of consumer staple companies which are trading at similar valuations.

Jain also said that, after a certain threshold, investors should not extrapolate continuous growth into returns.

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