Implementation of projects worth Rs.777 billion stalled

Lack of government clearances major cause for projects being stalled

by Mahesh Vyas

Implementation of projects that collectively envisaged investments worth Rs.777 billion was stalled during the December 2016 quarter. This is 38 per cent higher than the value of projects stalled during the preceding (September 2016) quarter. It is also more than ten per cent higher than the average value of projects getting stalled midway through their implementation during the past year.

The problem of projects getting stalled before completion continues to plague investments in India.

Demonetisation has increased uncertainties in the economy and these could become a new cause for projects getting stalled. During the quarter ended December 2016, six of the 22 projects stalled mentioned lack of promoter interest or unfavourable market conditions as the reason for stalling implementation. These two reasons are quite similar and essentially indicate an adverse business environment.

Five of these six projects were stalled in December, that is after the announcement of demonetisation in early November. Duet India Hotels stalled implementation of two hotels in Mumbai and 14 Holiday Inn Express projects across the country. Kalyani Steels lost interest in pursuing the implementation of its Rs.55 billion Koppal steel plant expansion plan in December. Chettinad Cement Corpn announced in early December that market conditions were unfavourable and so it was stalling the implementation of its Rs.20 billion Phase II and III expansion plans of its Gulbarga plant because of market conditions. Even Nagpur Municipal Corpn put on hold its Jaripatka Bus Stop Shopping Mall because of unfavourable market conditions.

Unfavourable market conditions and lack of promoter interest account for only about 11 per cent of the total projects stalled during the quarter of December 2016.

Eighty per cent of the investments that were stalled during the December 2016 quarter were stalled because of lack of environmental and non-environmental government clearances. Lack of government clearances was the biggest factor responsible for stalling of projects under implementation.

Government of Telangana’s Kurumurthy lift irrigation project, Bangalore Development Authority’s Basaveshwara Circle Hebbal Junction flyover and Welspun Energy’s Mirzapur Thermal Power Plant were stalled because of lack of environmental clearances. Skylark Buildcon and Piyush Palace failed to get other (non-environmental) clearances and so were stalled.

Not all projects can hope to get clearances from the environment department because there is often a trade-off between economic development and conservation of the environment. So, projects being stalled for environment clearances is understandable to some extent. However, promoters who initiated investment projects and even started implementation should not lose interest because of an adverse business environment. Six of the 16 projects that gave reasons for stalling their projects in the December 2016 quarter, mentioned reasons that imply an adverse business environment. It is important that such projects are revived and saved from remaining stalled for long.

CMIE STATISTICS
Unemployment Rate
Per cent
4.5 -0.1
Consumer Sentiments Index
Base September-December 2015
96.5 +0.2
Consumer Expectations Index
Base September-December 2015
95.7 0.0
Current Economic Conditions Index
Base September-December 2015
97.8 +0.5
Quarterly CapeEx Aggregates
(Rs.trillion) Dec 16 Mar 17 Jun 17 Sep 17
New projects 2.33 3.84 2.07 1.03
Completed projects 1.01 1.94 1.16 1.00
Stalled projects 1.14 0.73 2.67 0.67
Revived projects 0.18 0.67 0.30 0.29
Implementation stalled projects 0.83 0.33 0.68 0.62
Updated on: 16 Dec 2017 8:20PM
Quarterly Financials of Listed Companies
(% change) Dec 16 Mar 17 Jun 17 Sep 17
All listed Companies
 Income 6.2 10.2 9.8 8.2
 Expenses 6.3 11.9 10.0 9.5
 Net profit 40.2 16.0 -19.6 -18.1
 PAT margin (%) 6.0 6.0 5.3 5.6
 Count of Cos. 4,509 4,444 4,325 4,177
Non-financial Companies
 Income 5.9 11.8 10.4 8.1
 Expenses 7.2 15.6 10.6 8.1
 Net profit 24.5 -2.3 -25.0 -5.4
 PAT margin (%) 6.2 6.2 5.2 6.4
 Net fixed assets 6.9 9.3
 Current assets 2.7 79.6
 Current liabilities 8.8 10.0
 Borrowings 4.8 10.6
 Reserves & surplus 6.3 5.3
 Count of Cos. 3,484 3,440 3,358 3,245
Numbers are net of P&E
Updated on: 16 Dec 2017 8:20PM
Annual Financials of All Companies
(% change) FY14 FY15 FY16 FY17
All Companies
 Income 10.0 5.2 1.1 6.7
 Expenses 9.9 5.2 1.2 6.9
 Net profit -2.3 1.4 -13.1 20.6
 PAT margin (%) 3.2 3.2 2.9 6.4
 Assets 12.3 9.4 9.7 8.6
 Net worth 9.6 8.7 10.6 7.9
 RONW (%) 6.2 6.1 5.1 9.2
 Count of Cos. 24,045 23,818 20,791 4,756
Non-financial Companies
 Income 9.7 4.3 0.1 6.7
 Expenses 9.3 4.5 -0.6 7.5
 Net profit -2.7 -5.8 11.6 14.6
 PAT margin (%) 2.2 2.1 2.6 6.3
 Net fixed assets 11.6 13.3 15.5 7.3
 Net worth 8.1 7.1 11.0 6.3
 RONW (%) 5.1 4.9 5.4 10.3
 Debt / Equity (times) 1.1 1.1 1.1 0.7
 Interest cover (times) 2.0 1.9 2.0 3.4
 Net working capital cycle (days) 69 67 66 49
 Count of Cos. 19,288 19,270 17,281 3,624
Numbers are net of P&E
Updated on: 04 Dec 2017 11:59AM

Data added for HPI at Assessment prices and HPI at Market prices