Capex implementation stalled

by Mahesh Vyas

India implemented a fairly strict lockdown from March 25, 2020. All economic activities, save for some essential ones, were brought to a complete halt. Implementation of projects to create new capacities did not qualify as an essential activity and so, per definition, they had to be halted. In principle, therefore, all projects that were under implementation when the lockdown began must have necessarily slipped into the “implementation stalled” status. And, they must have stayed there for a fairly long time till relaxations rescued them from the freeze.

Implementation stalled is the status we assign to projects whose implementation is stalled. Such projects are not abandoned for good or shelved by the promoters for some time. They are not in their early stages either. These projects have made some progress in implementation and they have been stalled in the midst of such implementation.

In the past, implementation stalled indicated that projects were unable to get government clearances or faced funding challenges or encountered serious resistance in acquiring land. A lockdown is a new reason why projects have gone into the “implementation stalled” status.

Many companies announced the stalling of project implementation either through their regulators or through the stock exchanges, through press announcements or informed us during our regular conversations with them. We have tracked these announcements closely and have reported here, the summary statistics emerging from these announcements.

It is perhaps better to believe that implementation of practically all projects that were under implementation when the lockdown was announced were immediately stalled. But, CMIE’s CapEx monitoring team has not unilaterally marked all projects as stalled. We have stuck to the information issued or shared by the promoters, implementors or the agencies they report to. What follows therefore, is a summary of announcements of implementation of projects getting stalled.

569 projects worth Rs.8.7 trillion were stalled in the last week of March 2020 because of the lockdown. This is about 8 per cent of the total projects under implementation at the end of March 2020.

Roads projects accounted for 37 per cent or Rs.3.2 trillion of these. Power projects accounted for another 33 per cent at Rs.2.8 trillion and railways projects at Rs.1.1 trillion accounted for another 13 per cent. Manufacturing sector projects accounted for 5.6 per cent of all stalled projects during the last week of March.

The quarter ended June 2020 saw the lockdown being relaxed in multiple ways and on multiple occasions. The Unlock has been different in different places. The impact on projects under implementation is that, of the 569 projects that were stalled during the last week of March 2020, 259 worth Rs.4.9 trillion have started project implementation once again. In other words, 45.5 per cent of the projects accounting for 56.3 per cent of the stalled investments are humming again with activities.

Information on projects getting stalled during the quarter ended June 2020 is small. This is because whenever we were told that a project was stalled because of the lockdown, it was assumed that the project was stalled from the last week of March unless an alternate date was explicitly mentioned by the source of information.

Yet, 8 projects worth Rs.62 billion that were under implementation, were stalled during the quarter ended June 2020.

Lockdown and the Unlock phases have not progressed uniformly in time. They have vacillated and this has created its own uncertainty in addition to the uncertainty regarding the length of the lockdown and its impact on business.

Projects have therefore been stalled and restarted and can possibly be stalled again.

The net result seen in the data till the end of June is that the lockdown has led to a sharp increase in reported cases of implementation being stalled. The total outstanding cases of projects whose implementation was stalled rose from 1,046 as of the end of December 2019 to 1,686 by the end of March 2020 and was at 1,377 at the end of June 2020. So, in the first six months of 2020, there was a 31.6 per cent increase in the count of projects whose implementation was stalled.

In terms of value, the increase is 25.2 per cent. Implementation of projects worth Rs.13.5 trillion was stalled as of December 2019. This rose to Rs.22.2 trillion by the end of March 2020 and was Rs.16.9 trillion at the end of June 2020.

As the Unlock progresses in the coming months, we expect the value of investments locked in stalled projects to decline. The spike in project-implementation-stalled in the quarter of March 2020 is more symbolic than real. The real spike could have been much higher and the subsequent fall will be steeper.

However, beyond the clinical analysis of the data it is logical to believe that implementation of new capacity creating projects has slipped by several months already and that even if these restart soon it may not be possible to recover the lost time. Thus, an expectation of a general delay in completion of all projects to account for the time lost is in order. Besides, many manufacturing projects can be expected to be deliberately delayed because the lockdown has dampened demand. We may not be surprised if there is also an increase in projects being abandoned altogether or being shelved.

Unemployment Rate (30-DAY MVG. AVG.)
Per cent
7.7 +1.1
Consumer Sentiments Index
Base September-December 2015
44.9 0.0
Consumer Expectations Index
Base September-December 2015
47.2 0.0
Current Economic Conditions Index
Base September-December 2015
41.2 0.0
Quarterly CapEx Aggregates
(Rs.trillion) Sep 19 Dec 19 Mar 20 Jun 20
New projects 3.17 5.24 3.49 0.59
Completed projects 0.84 1.65 1.71 0.19
Stalled projects 0.41 0.61 0.77 0.11
Revived projects 0.43 0.83 0.42 0.55
Implementation stalled projects 0.90 0.15 9.54 0.07
Updated on: 03 Aug 2020 3:28PM
Quarterly Financials of Listed Companies
(% change) Sep 19 Dec 19 Mar 20 Jun 20
All listed Companies
 Income -2.3 -1.7 -4.7 -23.8
 Expenses -3.1 -2.2 -1.7 -25.6
 Net profit -1.3 -10.7 -43.9 -14.4
 PAT margin (%) 5.3 5.1 2.6 9.0
 Count of Cos. 4,447 4,418 3,911 475
Non-financial Companies
 Income -6.3 -5.5 -8.8 -34.4
 Expenses -6.7 -6.4 -4.8 -36.0
 Net profit -13.5 -13.6 -45.5 -32.7
 PAT margin (%) 5.8 5.7 3.6 8.9
 Net fixed assets 10.4 13.1
 Current assets 5.0 3.1
 Current liabilities 5.0 4.6
 Borrowings 8.4 14.6
 Reserves & surplus 5.9 2.3
 Count of Cos. 3,337 3,309 2,991 372
Numbers are net of P&E
Updated on: 03 Aug 2020 3:28PM
Annual Financials of All Companies
(% change) FY18 FY19 FY20
All Companies
 Income 8.4 13.2 5.2
 Expenses 9.8 13.4 2.7
 Net profit -39.9 21.0 38.6
 PAT margin (%) 2.0 2.4 7.6
 Assets 10.9 9.3 10.2
 Net worth 7.5 8.5 9.4
 RONW (%) 3.5 4.4 9.0
 Count of Cos. 26,524 25,174 1,087
Non-financial Companies
 Income 8.6 13.6 0.9
 Expenses 8.7 13.8 -0.4
 Net profit -8.5 23.7 6.4
 PAT margin (%) 2.8 3.2 10.2
 Net fixed assets 7.1 5.0 23.4
 Net worth 6.1 8.4 6.5
 RONW (%) 5.7 7.0 14.1
 Debt / Equity (times) 1.0 1.0 0.6
 Interest cover (times) 2.1 2.4 5.0
 Net working capital cycle (days) 77 70 26
 Count of Cos. 21,646 20,492 792
Numbers are net of P&E
Updated on: 28 Jul 2020 9:46PM