Project commissioning at its second best in a decade

Investments concentrated in a handful of big-ticket projects

by Manasi Swamy

Fiscal year 2016-17 saw commissioning of industrial & infrastructural projects worth Rs.5.13 trillion, the second largest in a decade. Project commissioning gathered pace three years back. It increased by a smart 16.9 per cent to Rs.4.02 trillion in 2014-15 and jumped further by 40.9 per cent to record a new high of Rs.5.66 trillion in 2015-16. Although commissioning figures for 2016-17 are currently lower than last year, these are tentative numbers and are likely to get revised upwards in due course.

Not all promoters are prompt in announcing the commissioning of their projects. Information about completion of a few projects becomes available with a lag - through annual reports, investor presentations, earnings conference call or interviews of company officials with the media.

There are 484 projects in CMIE’s CapEx database whose completion was scheduled in 2016-17, but information about their current status (whether or not the project is completed) is yet to come. These include a few large projects like SAIL’s Bhilai steel project (Rs.188 billion), BPCL’s Kochi integrated refinery expansion (Rs.165 billion), RIL’s Jamnagar petrochemicals plant expansion (Rs.160 billion), Essar Power’s Mahan thermal project (Rs.79 billion) and ITC’s BCTMP project (Rs.45 billion), which were in their last leg of completion as per the information available in the public domain or shared by their promoters.

Aggregate investment in the 484 projects whose commissioning status is yet unknown is to the tune of Rs.1.88 trillion. Even if a third of this has been completed on schedule, the total commissioning for 2016-17 will surpass the record high of 2015-16.

However, on the flip side, the investments completed in 2016-17 are concentrated in a handful of big-ticket projects. A fifth of the total investment completed was by Reliance in its Jio Infocom project. The company rolled out its 4G broadband services through this project with a huge investment of Rs.1 trillion. This is the largest project ever completed in India. The second largest project in India’s history - IOCL’s Paradip refinery commissioned in February 2016 - was one-third of Jio’s size (Rs.346 billion).

Nine other big projects were commissioned during 2016-17. These entailed an investment of Rs.1.29 trillion. The top 10 projects had a lion’s share of 46 per cent in the total investment completion in 2016-17.

Most of these projects were announced 7-10 years ago and have been commissioned after missing their deadlines several times. These are children of the capex boom that was witnessed between 2004 and 2011.

In terms of numbers, the project completion in 2016-17 was the second lowest in a decade. 1,360 projects were commissioned during the year, which is much lower than the decadal average of 1,562 projects.

The sectoral composition of projects commissioned reveals that direct and high employment generating sectors like manufacturing and mining have seen a sharp drop in 2016-17. The share of manufacturing sector has declined from 27.8 per cent in 2015-16 to 18.5 per cent in 2016-17, while that of mining has more than halved from six per cent to 2.5 per cent.

While completion of long-due large projects is a positive sign for the economy, this is unlikely to have a very significant second-rung impact on employment and aggregate demand.

CMIE STATISTICS
Unemployment Rate
Per cent
5.0 -0.1
Consumer Sentiments Index
Base September-December 2015
96.0 0.0
Consumer Expectations Index
Base September-December 2015
94.5 0.0
Current Economic Conditions Index
Base September-December 2015
98.2 0.0
Quarterly CapeEx Aggregates
(Rs.trillion) Dec 16 Mar 17 Jun 17 Sep 17
New projects 2.33 3.81 2.07 1.02
Completed projects 1.01 1.94 1.14 0.99
Stalled projects 1.13 0.70 2.66 0.64
Revived projects 0.18 0.67 0.30 0.23
Implementation stalled projects 0.82 0.33 0.68 0.61
Updated on: 24 Nov 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 8.6
 Expenses 6.3 11.9 10.0 9.8
 Net profit 40.3 15.8 -19.7 -17.5
 PAT margin (%) 6.1 6.0 5.3 5.9
 Count of Cos. 4,507 4,438 4,292 2,833
Non-financial Companies
 Income 5.9 11.8 10.4 8.6
 Expenses 7.2 15.6 10.7 8.5
 Net profit 24.5 -2.5 -25.1 -4.6
 PAT margin (%) 6.2 6.2 5.2 6.8
 Net fixed assets 6.9 10.1
 Current assets 2.6 2.3
 Current liabilities 8.8 10.0
 Borrowings 4.8 4.0
 Reserves & surplus 6.3 8.2
 Count of Cos. 3,488 3,439 3,343 2,079
Numbers are net of P&E
Updated on: 24 Nov 2017 8:30PM
Annual Financials of All Companies
(% change) FY14 FY15 FY16 FY17
All Companies
 Income 10.0 5.2 1.1 6.6
 Expenses 9.9 5.2 1.2 6.8
 Net profit -2.2 1.6 -12.9 20.2
 PAT margin (%) 3.2 3.2 2.9 6.5
 Assets 12.3 9.4 9.6 8.8
 Net worth 9.6 8.7 10.3 8.5
 RONW (%) 6.2 6.1 5.1 9.6
 Count of Cos. 23,895 23,579 20,184 3,629
Non-financial Companies
 Income 9.7 4.3 0.1 6.5
 Expenses 9.3 4.5 -0.6 7.4
 Net profit -2.7 -5.5 11.5 14.3
 PAT margin (%) 2.2 2.1 2.6 6.5
 Net fixed assets 11.6 13.4 15.1 7.3
 Net worth 8.2 7.1 10.6 7.2
 RONW (%) 5.1 4.9 5.4 11.0
 Debt / Equity (times) 1.1 1.1 1.1 0.6
 Interest cover (times) 2.0 1.9 2.0 3.7
 Net working capital cycle (days) 69 67 66 50
 Count of Cos. 19,154 19,053 16,707 2,782
Numbers are net of P&E
Updated on: 15 Nov 2017 2:29PM

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