A spurious rise in new investment proposals

by Mahesh Vyas

There was a little pick-up in new project announcements in the week ended May 7. 35 new projects were announced. Of these, cost was available for 17 projects and these added up to Rs.170 billion. The average weekly new investment announcements was a little short of Rs.50 billion during April. In comparison, the first week of May has seen a much higher announcement of new investments.

Most new projects announced are by government agencies. And, they emanate almost entirely from a government-linked exhibition. This is the India Integrated Transport & Logistics Summit, 2017. As a result, most of the new projects announced during this week were related to infrastructure. In particular, these were logistics parks.

A government press release states that 34 MoUs were signed during the three-day Summit. These apparently envisaged investments worth Rs.2 trillion. However, neither the press release nor the Summit’s website details the specific projects. The press release does describe them in general terms, though: “These MoUs were in the areas of port connectivity, Integrated Check Posts (ICP) in the states of Bihar, Uttarakhand, Uttar Pradesh, West Bengal, Manipur, access to land port in Tripura, Assam and Mizoram, development of Logistics Parks in Telengana, Andhra Pradesh, Karnataka, Madhya Pradesh, Assam, Gujarat, Mizoram, development and furthering of multi modal logistics parks in Mumbai and Bengaluru and Haryana, exploring investment opportunities in logistics sector, dredging of inland waterways, implementation of 79 port connectivity projects under Sagarmala, development of port roads to Chennai and Vishakhapatnam ports, and connectivity to airport in Navi Mumbai, among others.”

We could identify the announcement of 13 logistics parks projects and one integrated check post project on May 5. Of these, 8 were announced by NHAI. These involved investments worth Rs.124 billion. Container Corpn of India announced a logistics park worth Rs.22 billion, Land Ports Authority of India announced one for Rs.15 billion and Achievers Infra Solutions Pvt Ltd announced one worth Rs.5 billion. There are two projects by Adani Logistics but, their costs was not known.

These 13 projects account for 97 per cent of all the new investment proposals made during the week of May 7.

It is likely that some of the MoUs signed will fructify into specific investment projects in due course of time. And these in turn could spawn more projects. One of the objectives of the Summit was to bring down the cost of transportation through efficiency gains in planning multimodal transport systems.

The government of Haryana announced several projects in the road transport sector. These include a flyover, three underpasses and a bypass. No costs were available for these. The government of Himachal Pradesh announced a multi-storey parking complex and a college and the government of Uttarakhand announced a hospitality university. No costs were available for these either. The government of Gujarat announced two hospital projects in Rajkot - one is a super speciality hospital with an investment of Rs.1.5 billion and the other is a hospital with an investment of Rs.0.6 billion.

While all the government projects listed above are in infrastructure sectors which require government investments, two projects announced by the government of Madhya Pradesh seems a bit odd. Madhya Pradesh State Tourism Devp Corpn has announced two 5-Star Hotel projects, both in Bhopal. Arguably, running hotels is best left to the private sector and even a state tourism department should refrain from spending its resources in this direction.

It is apparent from the above listing that while the value of new investment projects during the week has increased, these do not reflect any turnaround in the investment sentiment, which continue to remain very weak. Firstly, the spike in new investment is the result of a government-sponsored exhibition which often promises a lot more than what is translated into real investment projects. Spurious promises to invest large amounts abound during these government-sponsored events. Second, there is still very little participation by the private sector.

Several recent surveys conducted by international agencies have shown that Indian companies are optimistic about the future. However, this enthusiasm seen in the survey results is not reflected in new investments being proposed by them.

CMIE STATISTICS
Unemployment Rate
Per cent
4.8 -0.0
Consumer Sentiments Index
Base September-December 2015
93.0 +0.8
Consumer Expectations Index
Base September-December 2015
91.0 +0.6
Current Economic Conditions Index
Base September-December 2015
96.0 +0.9
Quarterly CapeEx Aggregates
(Rs.trillion) Dec 16 Mar 17 Jun 17 Sep 17
New projects 2.32 3.77 2.02 0.88
Completed projects 1.00 1.91 1.13 0.70
Stalled projects 1.13 0.70 2.66 0.64
Revived projects 0.18 0.67 0.29 0.14
Implementation stalled projects 0.82 0.33 0.67 0.50
Updated on: 20 Oct 2017 12:20PM
Quarterly Financials of Listed Companies
(% change) Sep 16 Dec 16 Mar 17 Jun 17
All listed Companies
 Income 2.1 6.2 10.2 10.2
 Expenses 1.9 6.3 11.9 10.5
 Net profit 14.6 40.3 16.8 -18.9
 PAT margin (%) 6.9 6.1 6.1 5.4
 Count of Cos. 4,503 4,503 4,427 4,257
Non-financial Companies
 Income 0.6 5.9 11.8 10.9
 Expenses -0.2 7.2 15.5 11.1
 Net profit 26.7 24.6 -1.1 -24.3
 PAT margin (%) 6.9 6.2 6.3 5.3
 Net fixed assets -9.2 7.5
 Current assets 8.1 2.1
 Current liabilities 11.7 8.5
 Borrowings 3.1 4.9
 Reserves & surplus 8.4 6.5
 Count of Cos. 3,476 3,482 3,432 3,324
Numbers are net of P&E
Updated on: 20 Oct 2017 12:30PM
Annual Financials of All Companies
(% change) FY13 FY14 FY15 FY16
All Companies
 Income 12.6 10.0 5.0 1.0
 Expenses 12.8 9.9 5.1 1.2
 Net profit 1.0 -2.2 1.1 -15.2
 PAT margin (%) 3.5 3.2 3.2 3.0
 Assets 14.3 12.3 9.4 8.8
 Net worth 9.6 9.6 8.8 7.7
 RONW (%) 6.8 6.2 6.1 5.3
 Count of Cos. 25,932 23,621 23,131 19,375
Non-financial Companies
 Income 11.9 9.7 4.1 0.0
 Expenses 12.3 9.3 4.3 -0.6
 Net profit -8.4 -2.4 -6.3 6.5
 PAT margin (%) 2.4 2.2 2.1 2.7
 Net fixed assets 12.9 11.6 13.1 13.9
 Net worth 7.9 8.2 7.3 7.0
 RONW (%) 5.5 5.1 4.9 5.6
 Debt / Equity (times) 1.1 1.1 1.1 1.0
 Interest cover (times) 2.1 2.0 1.9 2.0
 Net working capital cycle (days) 72 69 67 67
 Count of Cos. 20,312 18,893 18,620 15,945
Numbers are net of P&E
Updated on: 21 Sep 2017 10:15AM

Time-series available since 2007-08