Industries undergirding infrastructure, such as metals, cement and allied businesses, are beginning to add to their capacities in concrete proof of demand revival, raising expectations that sustained expansion will now follow years of corporate deleveraging, the State Bank of India (SBI) chairman told ET.

New Delhi’s various incentive schemes to boost manufacturing in the country and spending by state-run companies in augmenting capacities could spill over to other segments, providing the much-needed impetus to the economy, Dinesh Kumar Khara, who heads the country’s biggest mass lender, said in an interview on Wednesday.

“In case of iron and steel, we are seeing some investment proposals and people have approached us for fresh loans also,” Khara said. “People are also looking at expanding brownfield capacity, which means they have a very clear visibility of demand that also augurs well for capacity utilisation.'”

India’s economy is expected to expand 9.5% this fiscal after the first contraction since Independence in FY21. Despite a surge in equity values and corporate profits, fresh investments have lately been rare as overleveraged companies used low interest rates to repay debt instead of putting up new plants. The ongoing revival may have taken economic activity to pre-pandemic levels, but the country needs more.

“To come out of the damage in the last 20 months, the activity levels have to be much stronger,” said Khara. “Pre- pandemic, there was already a tendency to slow down; so, returning to pre-pandemic levels is positive but it is not good enough. The rate of growth has to be much higher because cash flows of many (businesses) have to be repaired.”

While the market value of SBI has also more than doubled since the pandemic lows, the stock is still not reflecting its intrinsic strength and the value of its holdings in various businesses.

“I am a firm believer that the market undervalues SBI because if you look at our two listed subsidiaries, those are more than Rs 2 lakh crore, and our shares in those subsidiaries are 55% and 70%, respectively,” Khara said. “We also have many unlisted subsidiaries that are doing really well and (there are) more than 22,000 branches, 70,000 business correspondents and a similar number of ATMs. This is the might of our distribution network which helps us capture opportunities and to that extent, the main bank’s value has been grossly underestimated.” The lender plans to list its mutual fund and general insurance businesses as well but those are still “some time away,” Khara said.