Private enterprise drives new projects

by Mahesh Vyas

New investment proposals to create fresh productive capacities in the private sector seem to have recovered. The preliminary data from CMIE’s CapEx database show that investment proposals worth Rs.3.1 trillion were made by the private sector during the quarter ended September 2022. This estimate will be revised upwards as new data streams in over the next several weeks. But, even this preliminary estimate is much higher than the new investments proposed by the private sector in the past.

In the past, the average quarterly new investment proposals by the private sector have been less than Rs.2.5 trillion. Before the pandemic, between 2015 and 2019, the average was Rs.2.25 trillion. This fell to Rs.1.4 trillion in 2020 and then bounced back to Rs.2.33 trillion in 2021. But, 2022 has been markedly different.

In the first quarter of 2022, new investment proposals by the private sector shot up to Rs.6.27 trillion. They remained high at Rs.4.02 trillion in the June 2022 quarter and now the preliminary estimates from CapEx show that new investment proposals in the private sector have touched Rs.3.1 trillion in the September 2022 quarter. The average quarterly new investment proposals from the private sector in the first three quarters of 2022 therefore work out to Rs.4.46 trillion. This is significantly higher than the proposals made by the private sector in the past.

Large business groups such as Adani, Ambani and Vedanta have dominated new investments in 2022. In the March 2022 quarter it was Vedanta’s Rs.1.54 trillion Ahmedabad Semiconductor Manufacturing Plant that led the pack. It alone accounted for 18.5 per cent of the total investments in the quarter. The Mukesh Ambani group followed with projects worth Rs.1 trillion and the Adani group with another Rs.0.8 trillion. Collectively, these groups accounted for nearly 40 per cent of all investments in the March 2022 quarter. In the June 2022 quarter, the Adani group alone accounted for 35 per cent of all new investment proposals.

In contrast, in the September 2022 quarter, the presence of these large conglomerates is not at all dominating. A different set of private entrepreneurs have driven investment initiatives in this quarter. Acme Green Hydrogen and Chemicals leads with a proposed investment of Rs.524 billion in Tamil Nadu’s Thoothukudi. The company proposes to set up an ammonia plant, the first phase of which will be completed in 2024 and all phases will be completed in 2029. Next, Indosol Solar Pvt Ltd proposes to set up a Rs.431 billion metallurgical grade silicon, polysilicon and float glass manufacturing plant in Nellore in Andhra Pradesh. The plant expects to employ directly, a substantial 11,500 number of persons when it is completed. But, its completion date is not known.

The third largest investment proposed is by Avaada Energy Pvt Ltd. The company proposes to set up a one million tonne per annum green ammonia plant in Kota, Rajasthan with a capital outlay of Rs.400 billion.

Indosol Solar has proposed another project in Andhra Pradesh. This is a power project including solar, pumped storage and wind power in YSR district. This project is expected to cost Rs.330 billion. The other two large projects proposed during the September 2022 quarter are a Rs.312 billion renewable energy project in Mangaluru by Petronas Hydrogen and a Rs.300 billion green hydrogen plant in Thoothukudi by Amplus Energy Solutions. These six projects account for over 70 per cent of all known new investment proposals during the September 2022 quarter. Tamil Nadu and Andhra Pradesh have claimed more than half of the total investments during the quarter.

The well-known Adani-Ambani-Vedanta business groups were not conspicuous by their domination of new investments in India in the September 2022 quarter. Yet, concentration of investments in a few large projects was high in this quarter. The top three projects in the September 2022 quarter account for a hefty 42 per cent of the total investment proposals. In the preceding two quarters, the top three accounted for 36-37 per cent of total investments.

Two factors point towards the possibility of a genuine resurgence of private sector investments in India. First is the significant increase in investment proposals from the private sector seen in the past three quarters. These investments have nearly doubled compared to those seen earlier. The second encouraging factor is the diversification of investment proposals beyond the few large business houses. Some of those that dominated investments during the March and June 2022 quarters are popularly considered to be too close to the government. But, as is seen in the September 2022 quarter, large investment proposals are not concentrated merely in such business houses. These are promising trends.

While the private sector has begun proposing new investments in 2022, the government has withdrawn. The government’s share in total new investment proposals in the September quarter was a mere 4.8 per cent. The central government’s share was less than one per cent. This is a dramatic fall. Government accounted for nearly 58 per cent of all new investment proposals in 2019. Its share has been falling since then. It fell to 44 per cent in 2021. But, in 2022 the fall is dramatic 26 per cent in the March quarter, then 8 per cent in the June quarter and now 5 per cent in the September quarter.

Total new investment proposals were at a recent peak of Rs.8.5 trillion in the quarter of March 2022. They were reasonably high at Rs.4.4 trillion in the June 2022 quarter. And, the preliminary estimate for September 2022 is also at a respectable Rs.3.3 trillion.

CMIE STATISTICS
Unemployment Rate (30-DAY MVG. AVG.)
Per cent
7.8 +0.5
Consumer Sentiments Index
Base September-December 2015
81.4 0.0
Consumer Expectations Index
Base September-December 2015
81.0 0.0
Current Economic Conditions Index
Base September-December 2015
81.9 0.0
Quarterly CapEx Aggregates
(Rs.trillion) Dec 21 Mar 22 Jun 22 Sep 22
New projects 4.04 8.56 4.87 3.52
Completed projects 2.86 1.32 1.18 1.32
Stalled projects 0.08 0.43 0.53 0.06
Revived projects 1.98 0.33 0.29 0.08
Implementation stalled projects 0.66 0.09 0.29 0.26
Updated on: 28 Nov 2022 8:28PM
Quarterly Financials of Listed Companies
(% change) Dec 21 Mar 22 Jun 22 Sep 22
All listed Companies
 Income 23.4 20.8 40.3 24.7
 Expenses 21.3 19.8 41.5 26.2
 Net profit 35.4 31.3 21.1 -0.7
 PAT margin (%) 9.0 8.8 7.2 7.3
 Count of Cos. 4,755 4,668 4,672 4,451
Non-financial Companies
 Income 29.3 24.8 50.3 27.4
 Expenses 28.8 25.7 53.1 30.5
 Net profit 19.2 9.8 8.3 -21.9
 PAT margin (%) 7.5 7.6 5.7 5.1
 Net fixed assets 2.0 6.7
 Current assets 15.0 18.3
 Current liabilities 11.7 11.3
 Borrowings 3.6 10.5
 Reserves & surplus 11.3 7.3
 Count of Cos. 3,439 3,386 3,408 3,302
Numbers are net of P&E
Updated on: 28 Nov 2022 8:28PM
Annual Financials of All Companies
(% change) FY20 FY21 FY22
All Companies
 Income 0.6 -0.9 25.8
 Expenses 0.4 -3.2 24.7
 Net profit -3.8 75.3 61.3
 PAT margin (%) 2.0 4.4 8.0
 Assets 9.0 9.9 9.9
 Net worth 4.7 12.0 14.0
 RONW (%) 3.4 6.8 11.8
 Count of Cos. 33,286 32,160 8,832
Non-financial Companies
 Income -1.1 -1.9 31.7
 Expenses -0.9 -3.9 31.5
 Net profit -20.4 62.3 59.8
 PAT margin (%) 2.2 3.9 6.9
 Net fixed assets 11.3 2.2 2.1
 Net worth 2.0 10.5 14.5
 RONW (%) 4.6 7.5 13.3
 Debt / Equity (times) 1.2 1.0 0.7
 Interest cover (times) 1.9 2.4 4.3
 Net working capital cycle (days) 82 88 55
 Count of Cos. 26,274 25,220 6,566
Numbers are net of P&E
Updated on: 27 Nov 2022 6:02PM