Stable new investment announcements

by Mahesh Vyas

New project investments worth Rs.2.9 trillion were announced during the quarter ended March 2020. This is a preliminary estimate. We expect this estimate to increase in the coming quarters as more information flows in regarding this quarter.

The level of new investment announcements made in March 2020 is comparable to the levels seen in recent quarters. There is no deterioration, as was expected. New investment proposals have averaged around Rs.3.3 trillion in the past ten quarters. And, this is where the March 2020 quarter may end eventually.

The quarter of March 2020 however, ended in a very different world compared to where it began. The last ten days of the quarter saw the world rapidly shutdown to contain the spread of the Coronavirus. India saw a country-wide lockdown for 21 days. In many states the lockdown was longer. For example, in many cities of Maharashtra, the lockdown is for nearly four weeks.

The stability of new investment proposals at around Rs.3.3 trillion therefore, does not imply a stability of the investment climate. New challenges have emerged. Supply chains have been disrupted and demand has contracted during this shutdown. It will take time for business operations to return to normalcy. New investments is unlikely to be anywhere on the horizon for enterprise for some time.

New investments of the quarter ended December 2019 were boosted by Interglobe Aviation’s proposal to purchase 300 A320neo family aircraft. This project alone accounted for over half of the total new investment proposals during the quarter. We had expressed our scepticism regarding this proposal. If the project appeared to be extraordinary then, it appears to be more doubtful given the new restrictions on airlines following the Coronavirus pandemic.

New investments in the quarter ended March 2020 are boosted much lesser by such doubtful projects. A significant part of the new investment announcements of the quarter came from the Invest Karnataka event held in Bengaluru in mid February. The government claimed projects worth Rs.720 billion being signed at the event. However, we could trace new investment proposals worth only Rs.630 billion in Karnataka in the entire quarter.

The largest project signed at the Invest Karnataka event, and also the largest new project investment during the quarter is from Rajesh Exports. This successful exporter of gems and jewellery has proposed to set up a Rs.500 billion electric vehicles plant at Dharwad. It will also produce lithium ion cells and batteries at the plant. This implies a very substantial diversification for this gold jewellery industry-leader.

The next two big projects announced in the March 2020 quarter are both solar power projects. The larger of the two is the Rs.450 billion Andhra Pradesh Mega Solar Power Project. This envisages setting up six solar power parks in and around Rayalseema region in the districts of Anantapur, Kadapa, Kurnool and Prakasam. A new company, Andhra Pradesh Green Energy Corpn Ltd has been incorporated for the purpose.

While the above is a state-government initiative, the next solar project is a central government initiative. Solar Energy Corpn of India has invited bids from solar power developers to set up 2,000 mw of interstate transmission systems connected solar power projects. These projects are to be developed on a build own operate (BOO) basis. The total project outlay is Rs.130 billion.

Greenko Energies has announced three standalone pumped storage power projects. One each in the districts of Baran in Rajasthan, Tapi in Gujarat and Aurangabad in Maharashtra. These involve investments of Rs.117 billion, Rs.115 billion and Rs.95 billion, respectively.

Electricity projects dominate the new investment proposals of the March 2020 quarter. Of the 431 new projects announced during the quarter, only 44 were in the power sector. But, the investment in these accounted for 46 per cent of all investments.

There have been substantial revisions in the new investment proposals in the power sector. Most of these are for the quarter ended September 2019. Initially, this quarter showed an investment of only Rs.47 billion in the power sector. This was revised upwards to Rs.638 billion in the December quarter and further to Rs.1,843 billion in the March 2020 quarter.

As a result of these revisions, investment in the power sector during fiscal 2019-20 recovered from what initially looked like sharp fall. The share of the sector in total new investments was nearly 19 per cent in the year. This is lower than 21 per cent recorded last year but, much better than the 16 per cent and 11 per cent shares recorded in the preceding two years.

Fiscal 2019-20 ended with new investments of the order of Rs.11.9 trillion. This is much lower than the Rs.13.1 trillion worth of new investments recorded in 2018-19 and even lower than the Rs.14.2 trillion of new investments seen in 2017-18. Data for 2019-20 will be revised upwards. It is likely then, that new investments in 2019-20 will be similar to what was seen in 2018-19. This would be stability of new project investment proposals at a low level.

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