List of Top Capital Goods Companies in India: A common belief about the manufacturing sector is that people assume that it is just the industrial production industry. A closer look under the microscope shows that it covers every major sector that is involved in manufacturing, be it defense, construction, machinery, metallurgy, dies, tools, and so on. All these sectors exist under a different name, albeit the same industry – Capital Goods.
The Make In India program of manufacturing domestically and creating jobs has led to state governments actively investing in development and infrastructure to make this a reality. In this article, we’re going to take a look at the Capital Goods Industry, and some of the biggest listed capital goods companies in India.
Capital Goods Industry: Overview
According to Invest India, the Indian capital goods industry has a market size of 43.2 billion dollars and is a broad term for ten significant subsectors.
The main sectors of the capital goods industry are:
S. No. | Sector | Market Size ($ in Bn) |
1 | Heavy Electrical Equipment | 24.2 |
2 | Process Plant Equipment | 3.7 |
3 | Earth-moving and mining machinery | 3.3 |
4 | Printing Machinery | 3.01 |
5 | Food Processing Machinery | 2.4 |
6 | Dies, Moulds, and Press Tools | 2.3 |
7 | Textile Machinery | 1.8 |
8 | Machine Tools | 1.4 |
9 | Plastic Machinery | 0.5 |
10 | Metallurgical Machinery | 0.4 |
Source: Invest India
Manufacturing has an understated presence in the Indian economy, contributing 12 percent to the total manufacturing activity of India, and 2 percent to the country’s GDP. As such, it employs 5 million people directly and is set to employ 25 million people indirectly by 2025. India has the 4th largest market for machine tool consumption in Asia.
The government has allowed for 100 percent foreign direct investment in the electrical machinery sector. To the companies that set up manufacturing in India, the government is also providing benefits and perks, such as:
- No Industrial License required
- No Import license required
- Availability of land in industrial parks
- 25 percent corporate tax, 10 percent import duty, 18 percent GST and 7.5 percent import duty.
Here are the major stakeholders of the capital goods industry:
- Department of Heavy Industry,
- Ministry Of Heavy Industry and Public Enterprises
- Indian Construction Equipment Manufacturers Association
- Indian Machine Tool Manufacturers Association
- Indian Electrical & Electronics Manufacturers Association
- Agro & Food Processing Equipment
- Technology Providers Association of India
- Engineering Export Promotion Council
- Indian Printing Packaging & Allied Machinery Manufacturers Association
- Plastic Machinery Manufacturers Association of India and
- Textile Machinery Manufacturers Association
Listed Capital Goods Companies In India:
Here is a list of the biggest capital goods companies in India. All the companies mentioned in the article are a part of the BSE Capital Goods Sectoral Index.
1. Larsen & Toubro Ltd.:
Part of the Nifty 50 index, L&T is one of the biggest construction companies in the world. Started by two Europeans who moved to India, L&T is involved in the construction, engineering, real estate, and infrastructure industry. L&T is also one of India’s oldest capital goods companies, as it was founded in 1946.
Fundamentals Of Larsen & Toubro:
CMP | ₹ 2,259 | Market Cap (Cr.) | ₹ 3,17,463 Cr. |
EPS | ₹ 71.9 | Stock P/E | 31.6 |
ROCE | 11.0 % | ROE | 10.2 % |
Face Value | ₹ 2.00 | Book Value | ₹ 582 |
Promoter Holding | 0 | Price to Book Value | 3.88 |
Debt to Equity | 1.58 | Dividend Yield | 0.97 % |
Net Profit Margin | 6.28 % | Operating Profit Margin | 13.2 % |
L&T is a large-cap construction and capital goods company, having a gigantic market capitalization of ₹3,17,463 crores. Their revenues are also on par with the company’s size. Last year (FY 22), L&T reported a historical and all-time high revenue of ₹1,56,521 crores. For the 9 months of FY 23, they have already grossed revenues of 1,25,006 crores. This makes L&T one of the largest capital goods companies in India.
Their net profits for the same period is ₹8,071 crores, versus FY 22’s net profits of ₹10,419 crores. The company has an average ROE and ROCE of 10.2 percent and 11 percent respectively, which is realistic given the sheer size and industry presence of the company.
It has a slightly high D/E ratio of 1.58, but as the company has the cash flows to back it up, it should be of slightly less concern. The stock P/E of L&T is 31.6, slightly higher than its industry P/E of 23.
Further, the dividend investors should rejoice as the company has maintained a dividend payout of 35.3 percent. L&T has zero promoter holding, and its shares are owned by public investors (36.65), DIIs (38.64), FIIs (24.48), and the Government of India (0.23). In the past 5 years, L&T has given a return of 65.8 percent.
2. Siemens Ltd.:
Siemens India is the subsidiary of its German parent, Siemens AG, a technology company, which is also involved in infrastructure, digital transformation, transport, and electricity transmission. The company has a diversified and established business in different industries – Renewable energy, mobility, digital services financial services, and medical technology.
Fundamentals Of Siemens India:
CMP | ₹ 3,326 | Market Cap (Cr.) | ₹ 1,18,463 Cr. |
EPS | ₹ 49.3 | Stock P/E | 79.7 |
ROCE | 15.7 % | ROE | 13.9 % |
Face Value | ₹ 2.00 | Book Value | ₹ 326 |
Promoter Holding | 75% | Price to Book Value | 10.2 |
Debt to Equity | 0 | Dividend Yield | 0.30% |
Net Profit Margin | 9.45% | Operating Profit Margin | 11.90% |
Siemens India, a subsidiary of Siemens AG is a large-cap capital goods company. As per the latest data, they are sized at ₹1.18 lakh crore. The company is showing a growing trend in sales and profits, although at a slower-than-expected pace.
In FY 22, the company reported revenues of ₹16,138 crores vs ₹12,795 crores in FY 18. That is a slow sales growth of 7.8 percent over 5 years. But operating profit margins have grown from 10 percent to 12 percent over the same period.
For reference, FY 18 saw the company make ₹901 crores in net profits, and FY 22 saw ₹1,543 crores in net profits. Notably, the company has reported exceptional income in the hundreds ( Rs in crores) regularly over the years.
The company has had a low ROE and ROCE of 13.9 percent and 15.7 percent, but slightly higher than their 3-year average ROE (11.2 percent) and ROCE (13.9 percent). Siemens India is debt free, which is significant for a company of this size, allowing them to diversify their business.
For the dividend investors, Siemens India has maintained a positive and healthy dividend payout ratio of 27.2 percent. Promoters of the company hold their 75 percent stake with an iron fist, not shedding any stake in a while. Siemens India is a multi-bagger capital goods company, giving a 210 percent return in 5 years.
3. Hindustan Aeronautics Ltd:
At #3, we have HAL or Hindustan Aeronautics Ltd. HAL is a defense manufacturer, responsible for the manufacturing and export of fighter jets, helicopters, and other aircraft for the Indian Air Force as well as India’s allies. The company was founded in the year 1940, well before India’s independence. It was formerly named Hindustan Aircraft Ltd before eventually being renamed HAL. Of all the companies in this article, HAL was the latest to go public, being listed in March 2018.
Fundamentals Of HAL:
CMP | ₹ 2,805 | Market Cap (Cr.) | ₹ 93,794 Cr. |
EPS | ₹ 182 | Stock P/E | 15.4 |
ROCE | 30.5 % | ROE | 29.4 % |
Face Value | ₹ 10.0 | Book Value | ₹ 624 |
Promoter Holding | 75.2 % | Price to Book Value | 4.5 |
Debt to Equity | 0 | Dividend Yield | 1.78 % |
Net Profit Margin | 20.7 % | Operating Profit Margin | 22.8 % |
HAL is a defense stock as well as a capital goods stock, sized at ₹93,794 crores by market cap. The company had a very positive year in FY 22, generating great revenues and profits and breaking its own records. FY 22 saw the company make ₹24,620 crores in sales and ₹5,086 crores in net profits. 5-year sales growth has been low, at just 6.5 percent.
The company has an overwhelming ROE of 29.4 percent and a ROCE of 30.5 percent, showing efficient capital use. HAL is debt free, having a D/E ratio of zero. The stock is undervalued as per its P/E of 15.4, about 9 points lower than its industry P/E of 24.6.
The company has paid dividends consistently, with a dividend payout ratio of 32.1 percent. The promoter of HAL, i.e., the Government Of India owns a 75.15 percent stake in the company, with no change since June 2020. HAL is a multi-bagger defense and capital goods stock, giving a return of 149 percent in 5 years (since listing).
4. Bharat Electronics Ltd.:
At #4, we have Navratna PSU Bharat Electronics. The company is officially under the Ministry of Defence. Most of the company’s products are for the defense sector such as radar, energy storage, satellite integration, etc. BEL was established in 1954 and its main business is in the manufacturing of defense electronics.
Fundamentals Of Bharat Electronics:
CMP | ₹ 101 | Market Cap (Cr.) | ₹ 73,756 Cr |
EPS | ₹ 3.77 | Stock P/E | 26.8 |
ROCE | 27.1 % | ROE | 20.5 % |
Face Value | ₹ 1.00 | Book Value | ₹ 17.7 |
Promoter Holding | 51.1 % | Price to Book Value | 5.7 |
Debt to Equity | 0 | Dividend Yield | 1.49 % |
Net Profit Margin | 15.6 % | Operating Profit Margin | 21.8 % |
BEL reported ₹15,368 crores in revenue in FY 22, compared to ₹10,401 crores in FY 18. The operating profit margin of the company has improved from 20 percent to 22 percent.
Their Profits before tax (PBT) have also improved over the years, from ₹1,957 crores in FY 18 to ₹3,166 crores in FY 22. The company has also increased its dividend payout over the years. It has a healthy payout of 43.2 percent. BEL has a very positive and strong ROE (20.5 percent) and ROCE (27.1 percent).
This should come as no surprise, given that they are virtually debt free. The government has a 51 percent stake in BEL, with no change in holding anytime recently. Bharat Electronics has given a multi-bagger return of 128 percent over 5 years.
5. ABB India Ltd.:
Coming to the last company on our list of capital goods companies in India is ABB (India). The company is a power equipment manufacturer and a subsidiary of Asea Brown Boveri. The company has a diverse business in the engineering sector, with involvements in process automation, robotics, and more.
Fundamentals Of ABB India:
CMP | ₹ 3,230 | Market Cap (Cr.) | ₹ 68,446 Cr. |
EPS | ₹ 48.0 | Stock P/E | 89.6 |
ROCE | 23.0 % | ROE | 17.0 % |
Face Value | ₹ 2.00 | Book Value | ₹ 233 |
Promoter Holding | 75.0 % | Price to Book Value | 13.9 |
Debt to Equity | 0.01 | Dividend Yield | 0.17 % |
Net Profit Margin | 8.92 % | Operating Profit Margin | 11.3 % |
ABB India is a large-cap capital goods company. FY 22 saw the company make ₹8,568 crores, translating into a net profit of ₹1,016 crores with an OPM of 11 percent. It is interesting to note that almost half of its FY 22 profits (₹506 crores) were from other income sources.
Although the company’s revenues are growing, it is at a slower rate (7.05 percent in 5 years). The company has had a very good ROE (17 percent) and ROCE (23 percent). ABB is virtually debt free, having a D/E ratio of 0.01. The company’s stock P/E is extremely high compared to its industry (35.3), indicating that the stock is overpriced currently.
The shareholding reveals no major changes, with the promoters having a stronghold on 75 percent of the company. ABB India is one the best-performing stocks in this article, giving a staggering 183 percent return in 5 years.
In Closing:
Every capital good product made by the companies above is necessary for the businesses that use them. They make production smoother and more efficient while improving the quality of products. What do you think about the capital goods industry and listed capital goods companies in India? Will it take over to make India the manufacturing hub of the world?
Let us know! Happy Investing!
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