India Is On The Cusp Of Decade-Long ‘Capex Mahotsav’, Says Birla
Billionaire Kumar Mangalam Birla shares his views on the year gone by and the decade to come.
India is on the cusp of a “Capex Mahotsav”, or festival, across sectors over the next decade following the disruptions of the Covid-19 pandemic, according to Kumar Mangalam Birla, chairman of the Aditya Birla Group.
“A generation of entrepreneurs will take advantage of economic reforms and as the twin-balance sheet problem of stressed loans and over-leveraged corporates gets resolved,” the tycoon said in a note that was posted on Aditya Birla Group's official website.
“The private sector is also firing on two engines, the conventional and the new economy, call it the ‘double-engine growth’,” Birla wrote. “Investors are excited about growth prospects in core sectors as well as sunrise sectors. In my view, though, 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.”
The world, he said, is awash in capital and there has perhaps rarely been a better time to be an entrepreneur, as everyone from angel investors to the public markets line up to back ideas. The competition for investment opportunities and the fear of missing out have driven up valuations of many fledgling companies to stratospheric levels, he said.
“A 20-year-old can build a multi-billion-dollar company, proudly wearing the badge of a college dropout. At the same time, a 50-year-old entrepreneur can build a company in a new space, confident that she has years ahead to see her dreams come to fruition.”Kumar Mangalam Birla
He, however, had a word of caution. “At some stage unit economics will have to matter and trusty old concepts like cash flows and gross margins will guide behaviour and actions and large waves of cheap capital will eventually erode all other entry barriers,” he said.
Global Economy
Even as the 2020’s began with a shock, Birla said the global economy and markets are poised for long-term growth.
The world’s two largest economies, Birla said, are expected to add 5% incremental output in the coming year and the American economy has recorded its sharpest rebound in half a century. He’s “unambiguously positive” on the S&P 500 from a decadal view even though imminent liquidity tightening has seen the market fall.
The tycoon said lessons are to be learnt from the “whiplash” that were the global supply chain disruptions.
“While the ‘triumphant proclamations of software’ are visible, the physical world still matters,” he said. The lessons, according to Birla, are:
• Efficiency wins in the short term, but resilience translates to value in the long term.
• Nearshoring, reasonable inventory holding.
• Multiple supplier alternatives.
• More sophisticated supply chain solutions.
He referred to the “indomitable spirit” the world has shown since the pandemic, such as the global vaccination efforts.
“Collective human endeavour has generated astonishing outcomes, and yet is being asked to achieve more,” the tycoon wrote. “In less than two years post the outbreak of the pandemic, 10 billion doses of the vaccine have been administered globally.”
Birla said India has leapfrogged on this count by administering over 1.6 billion doses.
