Rs.1.4 trillion worth of investments abandoned/stalled in April

by Mahesh Vyas

India lost over a trillion rupees worth of investments in the last week of April because seven large projects that were announced earlier were abandoned. This includes loss of perhaps, the most prestigious investment by any foreign company in India - the USD 12 billion mega steel project by Korean steel giant, POSCO.

POSCO had three projects outstanding in India. The first is a 4 million tonne steel plant and the other two are substantial expansions of the same. Each of these entailed an investment of Rs.166.5 billion and thus the total investment was of the order of Rs.500 billion. The projects envisaged the creation of 12 million tonnes of steel capacity and were located in the Paradip district of Odisha.

The Odisha government formally announced the cancellation of the project on April 29.

The project was announced twelve years ago in 2005. The state government had acquired 578 acres of non-forest land and 1,301 acres of forest land for the project. 1,880 acres of the land was handed over to POSCO. The allotment of land now stands cancelled.

Earlier, POSCO had requested the government to take back the land as it was unable to start work on the project. The project has been mired in controversies over protection of forests, tribals and the environment. It has faced numerous agitations and enquiries from government-appointed committees. POSCO apparently lost interest in the project. It is telling in a sense, that an ambitious large project is cancelled after 12 years of wrangling.

Sajan Jindal of JSW Steel has evinced interest in using the land to set up a 10 million tonne steel plant at the location. It is interesting that JSW is interested in a project that has been so mired in controversies.

The other four projects that were abandoned during the last week of April are no less prestigious. All of them belong to the Central or State governments.

The Central Electricity Authority (CEA) banned the construction of new thermal power plants and this led to the abandoning of Andhra Pradesh Power Generation Corpn’s (APGENCO) 4,000 mw Srikakulam Super Critical Coal-based thermal power project. The project was announced in November 2014 and it envisaged an investment of Rs.260 billion. Even this project faced resistance from villagers in surrendering their land for the project. The state government announced the calling off of the project on April 29. The government also said that there is a rethink on the proposed coal-based plant of East Coast Energy Pvt Ltd at Bhavanapadu.

On April 30, Hindu Business Line reported that NLC India (formerly Neyveli Lignite Corpn) has decided to abandon its proposed 4,000 mw coal-based power plant at Sirkali in Tamil Nadu. The purpose is that it is unviable to transport coal over a distance of 1,650 km from the Talabira mines in Odisha. The project was announced in 2010 and the PPA was signed in 2011.

This decision effectively led to abandoning of two projects - first the 1,980 mv (660 x 3) project and second its equal substantial expansion of an additional 1,980 mw. The total cost involved in both projects add up to Rs.245 billion.

Finally, while private sector’s JSW is keen to replace a troubled project, public sector Neelachal Ispat Nigam has cited unfavourable market conditions to exit their projects. The company stalled its Rs.60 billion - 1.1 million tonnes per annum hot metal steel expansion plan and abandoned its Rs.140 billion 2.8 million tonnes per annum plant.

Investments envisaged in the seven projects (including three of POSCO) abandoned add up to Rs.1.14 trillion. And, if we add Rs.60 billion of the stalled project of Neelachal, the total investments that were either stalled or abandoned adds up to Rs.1.2 trillion.

The value of this abandoning of projects during the last week of April is higher than the value of abandoning of projects in any quarter. POSCO alone is not responsible for this. Its projects account for less than half of the total projects abandoned.

Totally, 19 projects were abandoned during April. These collectively envisaged an investment of Rs.1.32 trillion. Besides, 6 projects that were under implementation were stalled. These envisaged an investment of Rs.85 billion. Therefore, projects worth Rs.1.4 trillion ran into rough weather during April 2017.

Unemployment Rate
Per cent
5.8 -0.1
Consumer Sentiments Index
Base September-December 2015
96.0 -0.2
Consumer Expectations Index
Base September-December 2015
96.2 -0.3
Current Economic Conditions Index
Base September-December 2015
95.5 0.0
Quarterly CapeEx Aggregates
(Rs.trillion) Jun 17 Sep 17 Dec 17 Mar 18
New projects 2.50 1.22 1.34 2.91
Completed projects 0.87 1.24 1.11 1.35
Stalled projects 2.68 0.69 0.88 3.41
Revived projects 0.23 0.34 0.22 0.24
Implementation stalled projects 0.76 0.78 0.71 1.05
Updated on: 21 Jun 2018 8:20PM
Quarterly Financials of Listed Companies
(% change) Jun 17 Sep 17 Dec 17 Mar 18
All listed Companies
 Income 9.6 7.9 11.9 10.7
 Expenses 9.9 9.0 13.0 17.3
 Net profit -19.8 -18.0 -14.3 -78.4
 PAT margin (%) 5.3 5.5 4.8 1.4
 Count of Cos. 4,512 4,498 4,488 4,231
Non-financial Companies
 Income 10.2 8.2 13.3 12.4
 Expenses 10.5 8.1 12.3 13.0
 Net profit -25.1 -6.0 13.1 1.4
 PAT margin (%) 5.2 6.2 6.4 6.8
 Net fixed assets 9.2 11.9
 Current assets 78.6 8.4
 Current liabilities 11.0 10.7
 Borrowings 10.4 1.4
 Reserves & surplus 5.2 8.1
 Count of Cos. 3,480 3,467 3,471 3,281
Numbers are net of P&E
Updated on: 21 Jun 2018 8:21PM
Annual Financials of All Companies
(% change) FY15 FY16 FY17 FY18
All Companies
 Income 5.6 1.8 5.8 15.1
 Expenses 5.7 1.9 5.8 21.9
 Net profit 0.0 -9.8 26.7 -75.8
 PAT margin (%) 3.0 2.8 3.5 1.5
 Assets 9.5 10.1 7.2 16.3
 Net worth 8.5 11.3 6.9 11.2
 RONW (%) 5.8 4.9 5.9 2.0
 Count of Cos. 25,972 24,188 21,604 134
Non-financial Companies
 Income 4.8 0.9 5.6 12.1
 Expenses 5.0 0.3 5.9 11.6
 Net profit -8.2 19.5 21.8 12.2
 PAT margin (%) 2.0 2.4 3.0 11.7
 Net fixed assets 13.3 17.3 6.3 23.3
 Net worth 7.0 12.0 5.6 6.5
 RONW (%) 4.6 5.1 6.0 15.0
 Debt / Equity (times) 1.1 1.1 1.0 0.3
 Interest cover (times) 1.9 1.9 2.1 11.5
 Net working capital cycle (days) 66 65 62 -24
 Count of Cos. 21,193 20,267 18,054 92
Numbers are net of P&E
Updated on: 20 Jun 2018 12:40PM