India to see decade of capex mahotsav: Kumar Mangalam Birla

“I believe, we have upon us a forthcoming decade of Capex Mahotsav in India,” Birla wrote on a note on LinkedIn that was titled “My Reflection 2021-2022”

Birla said that in India, a generation of entrepreneurs are now taking advantage of economic reforms as profound as those in 1991.

1991 is the year when some of the important policy initiatives were introduced in the budget for correcting the fiscal imbalance, like reduction in fertilizer subsidy, abolition of subsidy on sugar, disinvestment of a part of the government’s equity holdings in select public sector undertakings. “The private sector is also firing on two-engines, the conventional and the new economy. I call it the Double-engine growth,” Birla said.

Investors are excited about growth prospects in core sectors as well as sunrise sectors… the word sunrise sector applies to the entire landscape in India, which includes both conventional sectors like cement, steel, power and auto and emerging areas like digital and renewables, Birla said.

Whiplash effects have come into force, with shortages in humble $1 semiconductors in Taiwan, and a fire in a lithography factory in Berlin, lengthening the queues for eager buyers of new cars in India, he said.

“In messages reminiscent of the license era, hopeful car aspirants are now being put in long waiting lists as companies scramble to crank up production,” Birla said, adding that these whiplash effects have called into question a decades long shift towards increasing efficiency and finely tuned precision operations that optimized operating costs but took away room for margins of error.

Birla said that the world is filled with Capital and is the best time to be an entrepreneur. “The competition for investment opportunities and the Fear of Missing Out (FOMO) have driven up valuations of many fledgling companies to stratospheric levels,” He said.

Several firms going for an IPO in the recent times saw valuations sky rocketing. Zomato, for example, a food delivery company, listed its shares in Indian stock markets. Its IPO was oversubscribed 35 times, giving it a valuation of $12 billion.

Birla said that ‘trusty old concepts’ like cash flows and gross margins will help strengthen the valuations going ahead. “Trusty old concepts like cash flows and gross margins will guide behavior and actions. The only sustainable moat is the one based on intellect. Large waves of cheap capital will eventually erode all other entry barriers,” he said.

Valuation and business longevity will automatically follow, he said.

“From Aditya Birla Group’s experience in multiple businesses, across multiple geographies, I can say that in the long run sustainable and successful businesses are those that generate tangible profits, prosperity, livelihoods quarter after quarter,” Birla said.