Journal Press India^®

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Capital Expenditure for any company is a budgeted expenditure since it is difficult to reverse capital spends. This study aims at testing whether capex infusion serves as a fuel for the listed power sector companies’ financial growth thus leading to enhanced valuations. Pearson’s correlation coefficient was used to understand the impact of Capex on the financial variables of the sample companies. Application of Jenson’s Alpha and PEG ratio helped understand whether the sample companies were undervalued or overvalued. First, the Pearson’s correlation analysis conveys that a positive correlation exists between capex and the financial variables representing the financial growth of the sample companies. Secondly the application of Jenson’s alpha and PEG ratio suggested that most of the companies are overvalued. Finally, the study concluded that since the Pearson’s correlation of Capex with financial variables is high, future capex infusion will make these sample companies financials more attractive.

Keywords

Capex investments; Financial variables; Power sector; Listed companies; S&P BSE power index

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