No improvement in new investment proposals

by Mahesh Vyas

Proposals worth Rs.587 billion were made for investments into the creation of new capacities during the quarter ended September 2020. This is comparable to the Rs.561 billion worth of investment proposals made initially in the previous quarter ended June 2020.

The quarter ended June 2020 was the first quarter that experienced the nation-wide lockdown following the Covid-19 pandemic. It included the month of April that experienced the strictest lockdown. We had described the investments made during this quarter as the nadir of new investment proposals. Assuming that new investment proposals in practice can never be zero but they can only tend to zero, the Rs.561 billion was considered to be the closest that new investments can reach to zero. This is because no entrepreneur would consider making an investment proposal during such a period.

By the end of September, that nadir of new investment got revised to Rs.691 billion. In comparison, the Rs.587 billion is smaller. It can be assumed that revisions would raise this value and bring it closer to the revised value of Rs.691 billion for the June quarter.

The implication of the above is that even in the second quarter of the lockdown which saw significant relaxations, new investment proposal continued to remain as depressing as they were when the lockdown began.

Before the lockdown, new investment proposals averaged between three to four thousand billion rupees per quarter. In better times, these averaged twice as high. It could take a long time before new investment proposals climb up to these levels.

Five projects collectively account for half the new investment projects proposed in the September 2020 quarter. These are a multi-location Rs.70 billion solar power project in Rajasthan by Solar Energy Corpn, a Rs.54 billion solar cells manufacturing project in Chennai by Vikram Solar, a Rs.50 billion biotech and life sciences park in Bangalore by the Government of Karnataka, a Rs.32.5 billion solar power project in Telangana by Singareni Collieries, and a multi-location Rs.52 billion electric vehicle manufacturing plant in Uttar Pradesh by Edison Motor India.

The manufacturing sector accounted for 55 per cent of the new investments in the September 2020 quarter. Within manufacturing, it is chemicals industry that have attracted most investments. Besides the Rs.50 billion biotech park mentioned above, there is a Rs.20 billion fertiliser plant proposed in Ganjam in Odisha and a Rs.20 billion plastic furniture plant proposed in multiple locations in Karnataka.

The ownership structure of new investment proposals is the same as it was in the June 2020 quarter. 44 per cent of the new investments are by government agencies and the rest are by the private sector. The Rs.258 billion investment proposals made by the governments, both central and the states, are the lowest made by them in any quarter in the past 16 years, since June 2004. The same is true for private sector investments as well. Their Rs.328 billion is also the lowest by them since June 2004.

Projects worth Rs.297 billion that were abandoned earlier, revived in the September 2020 quarter. The Delhi government has revived its Rs.74 billion Expo-City-cum-Convention Centre and the Ministry of Shipping has revived its Rs.70 billion Mega Transhipment Port Project.

While new investment proposals have understandably fallen sharply in 2020-21, there has been a sharp revision in estimates for 2019-20. New data available since June 2020 has added a substantial Rs.2.2 trillion to the stock of new investment proposals made during 2019-20. This brings the new investment proposals in 2019-20 up to Rs.14.2 trillion as against Rs.11.9 trillion estimated earlier.

This revision implies that new investment proposals were falling only mildly since 2017-18 when they added up to Rs.15 trillion. This fell to Rs.14.6 trillion in 2018-19 and then to Rs.14.2 trillion in 2019-20.

Cumulative new investment proposals in 2020-21 have been Rs.1.3 trillion. We do not expect new investment proposals to cross Rs.5 trillion in this year. New investment proposals have never been lower than Rs.5 trillion since 2004-05. This can change if the central government decides to make large investments into infrastructure. So far, the government has shown no signs or any inclinations to make large capacity building investments this year


The corporate sector does not have a good reason to expand capacities at this time. A sample of 2,329 companies shows that asset utilisation (sales to net fixed assets net of revaluation reserves) in 2019-20 was at an alltime low of 1.98. Corporate sector is laden with excess capacity. Besides, there is considerable demand uncertainty. The prolonged lockdown has led to job losses and also income contraction. It is not clear when jobs and incomes will repair with earlier levels and return to a growth trajectory from there. Till then, corporates are likely to focus more on cost management than on expansion.

Unemployment Rate (30-DAY MVG. AVG.)
Per cent
7.7 -0.4
Consumer Sentiments Index
Base September-December 2015
54.8 -1.0
Consumer Expectations Index
Base September-December 2015
56.6 -0.5
Current Economic Conditions Index
Base September-December 2015
52.0 -1.7
Quarterly CapEx Aggregates
(Rs.trillion) Jun 20 Sep 20 Dec 20 Mar 21
New projects 0.96 1.41 1.16 1.52
Completed projects 0.28 0.73 0.83 0.88
Stalled projects 0.11 0.08 0.31 0.14
Revived projects 0.68 0.29 0.11 0.14
Implementation stalled projects 0.09 0.07 0.15 0.30
Updated on: 06 May 2021 9:28AM
Quarterly Financials of Listed Companies
(% change) Jun 20 Sep 20 Dec 20 Mar 21
All listed Companies
 Income -27.7 -6.3 1.6 11.7
 Expenses -27.9 -10.3 0.1 6.6
 Net profit -40.5 47.2 57.7 53.3
 PAT margin (%) 5.2 8.3 8.5 13.3
 Count of Cos. 4,401 4,402 4,376 274
Non-financial Companies
 Income -37.4 -10.5 0.2 16.2
 Expenses -37.7 -14.2 -0.7 12.8
 Net profit -56.0 31.5 54.3 34.1
 PAT margin (%) 4.5 8.1 8.9 13.4
 Net fixed assets 5.9 9.2
 Current assets 0.7 11.1
 Current liabilities -2.7 -15.8
 Borrowings 8.3 -11.0
 Reserves & surplus 4.2 21.4
 Count of Cos. 3,267 3,267 3,253 200
Numbers are net of P&E
Updated on: 06 May 2021 9:28AM
Annual Financials of All Companies
(% change) FY19 FY20 FY21
All Companies
 Income 13.4 0.0 -6.4
 Expenses 13.8 0.0 -7.3
 Net profit 15.2 -10.4 0.9
 PAT margin (%) 2.1 2.1 10.0
 Assets 9.8 8.1 0.7
 Net worth 8.4 4.4 -0.1
 RONW (%) 3.8 3.5 11.7
 Count of Cos. 30,871 29,514 44
Non-financial Companies
 Income 14.1 -1.9 -6.7
 Expenses 14.3 -1.6 -7.8
 Net profit 21.7 -20.6 1.3
 PAT margin (%) 2.9 2.4 10.6
 Net fixed assets 5.6 9.4 -0.2
 Net worth 8.0 2.1 -0.2
 RONW (%) 6.4 5.0 13.2
 Debt / Equity (times) 1.0 1.1 0.1
 Interest cover (times) 2.3 2.0 21.9
 Net working capital cycle (days) 73 80 37
 Count of Cos. 24,702 23,523 36
Numbers are net of P&E
Updated on: 04 May 2021 1:37PM