New investment project announcements fall sharply

Lowest numbers in over a decade

by Mahesh Vyas

New investment proposals worth Rs.1.25 trillion were observed during the quarter ended December 2016. This is low compared to the average Rs.2.36 trillion worth of new investments seen per quarter in the preceding nine quarters of the Modi government.

Data suggests that demonetisation has hit the pace of announcement of new investment proposals during the quarter ended December 2016. 227 new investment proposals worth Rs.818 billion were announced during this quarter till November 8. In comparison, only 177 investment proposals worth Rs.437 billion were made between November 9 and December 31, 2016.

The fall in investment proposals becomes more apparent when we adjust these values for the number of days in each period. The quarter consisted of 39 days before demonetisation and 53 days, after. Evidently, the quarter had more days in the post-demonetisation period and yet, the investments during this period was lesser than in the shorter pre-demonetisation period.

New investments worth Rs.20.97 billion were announced, on an average, per day during the 39 pre-demonetisation days from October 1 through November 8. This average dropped sharply by 61 per cent to Rs.8.24 billion during the 53 post-demonetisation period. The number of projects announced per day dropped from 6 to 3 by a similar comparison.

If the pre-demonetisation rate of new investment proposals had continued during the post-demonetisation period, the quarter could have ended with new investment proposals worth Rs.1.89 trillion. This would still be lower than in the preceding quarter (Rs.1.94 trillion) or the average new investment proposals worth Rs.2.36 trillion since the establishment of the Modi government.

New investments, therefore, had slowed during recent quarters and, demonetisation has further slowed down their pace.

The slowdown in new investment proposals is stark in terms of the number of new proposals. Only 404 new investment proposals were observed during the quarter ended December 2016. This is the lowest number of new projects announced in a quarter in over a decade. The number of new projects had dropped to below-500 for the first time in a decade during the pervious (September 2016) quarter. The fall to close to just-over 400 projects is a very sharp fall to a new low.

On an average 7-8 projects are announced per day. The post-demonetisation fall in this average to just 3 projects per day reflects a new level of anxiety on the investments front.

Evidently, uncertainties caused by demonetisation have played a role in the fall in the flow of investments. The investments climate has been weak for some time. This is now expected to remain weak for some more time.

CMIE STATISTICS
Unemployment Rate
Per cent
23.6 -0.2
Consumer Sentiments Index
Base September-December 2015
40.1 -0.9
Consumer Expectations Index
Base September-December 2015
41.4 -0.7
Current Economic Conditions Index
Base September-December 2015
38.0 -1.2
Quarterly CapEx Aggregates
(Rs.trillion) Jun 19 Sep 19 Dec 19 Mar 20
New projects 1.12 2.19 5.02 3.08
Completed projects 0.88 0.85 1.65 1.30
Stalled projects 0.13 0.41 0.60 0.59
Revived projects 0.29 0.54 0.83 0.42
Implementation stalled projects 0.98 0.85 0.15 5.79
Updated on: 30 May 2020 8:28PM
Quarterly Financials of Listed Companies
(% change) Jun 19 Sep 19 Dec 19 Mar 20
All listed Companies
 Income 4.7 -2.2 -1.7 -0.2
 Expenses 2.7 -3.1 -2.2 1.2
 Net profit 17.4 -2.3 -9.9 -3.7
 PAT margin (%) 6.2 5.3 5.2 9.5
 Count of Cos. 4,471 4,430 4,379 366
Non-financial Companies
 Income 2.4 -6.4 -5.4 -4.1
 Expenses 1.7 -6.7 -6.3 -3.6
 Net profit -8.6 -14.5 -13.0 2.6
 PAT margin (%) 6.3 5.8 5.8 11.0
 Net fixed assets 10.4 21.5
 Current assets 4.9 9.1
 Current liabilities 4.9 8.1
 Borrowings 8.5 15.1
 Reserves & surplus 6.1 14.3
 Count of Cos. 3,349 3,325 3,280 294
Numbers are net of P&E
Updated on: 30 May 2020 8:28PM
Annual Financials of All Companies
(% change) FY17 FY18 FY19
All Companies
 Income 6.1 8.1 14.7
 Expenses 6.1 9.6 15.0
 Net profit 26.2 -39.9 20.5
 PAT margin (%) 3.3 2.1 3.2
 Assets 8.6 10.9 9.9
 Net worth 9.6 7.5 9.3
 RONW (%) 5.8 3.5 5.3
 Count of Cos. 28,112 25,794 18,040
Non-financial Companies
 Income 5.8 8.3 15.4
 Expenses 6.0 8.4 15.9
 Net profit 22.9 -8.7 18.8
 PAT margin (%) 2.9 2.8 4.0
 Net fixed assets 9.2 6.9 5.7
 Net worth 8.9 6.0 8.8
 RONW (%) 6.2 5.7 8.1
 Debt / Equity (times) 1.1 1.0 0.8
 Interest cover (times) 2.0 2.2 2.8
 Net working capital cycle (days) 85 76 57
 Count of Cos. 22,951 21,018 14,184
Numbers are net of P&E
Updated on: 29 May 2020 9:58AM