Capital intensity

How much invested capital a business needs per rupee of revenue. Net fixed assets divided by sales is the simplest form.

A manufacturer needing ₹2,900 crore of plant for ₹4,800 crore of revenue has a capital intensity of 0.6.

The ratio sets the pace at which a company can grow and the size of the funding gap when it does. A business at 0.6 that wants ₹1,000 crore more revenue needs roughly ₹600 crore of new assets, before working capital, and that money has to come from somewhere.

It also explains why returns differ so persistently between industries. Cement, steel and telecom carry high intensity and structurally lower returns; software and consumer brands carry low intensity and structurally higher ones.

Capital intensity is destiny more often than strategy is.