Project completions slow down

by Mahesh Vyas

Projects worth Rs,507 billion were completed during the quarter ended June 2021 as of data available till the end of that quarter. Of course, this value will be revised upwards as new information will flow in during the coming week. Also, this Rs.507 billion represents only 154 of the 245 projects completed during the quarter. So to that extent, the total value of projects commissioned during the quarter would be higher. It is likely that the cost of the remaining projects is relatively small, but the number of such projects at 91 is quite large.

Earlier, in March 2021, we had anticipated that 849 projects would get commissioned during the quarter ended June 2021. Of these, cost was available for 442 projects. These envisaged an investment of Rs.2 trillion. Compared to this expectation of 849 projects worth Rs.2 trillion getting completed in the quarter ended June 2021, available information as of July 1, 2021 shows a completion of only 245 projects worth Rs.507 billion. This implies an achievement of about a quarter of the expectation.

This achievement rate is low partly because of a delay in the arrival of all the relevant data and also because the quarter ended June 2020 was the one that saw the second wave of Covid-19 which could have slowed down the implementation of projects. We now estimate that projects worth Rs.1.1 trillion would be commissioned during the June 2021 quarter. This would be half of the earlier expectation. Much of this delay can be attributed to the second wave of Covid 19 and its fallout on economic expectations.

As new information flows in the coming weeks, it is expected to reveal more completions than recorded so far. Monitoring capex involves plenty of asymmetric information. For example, it was found that fifteen of the 849 projects that were expected to be completed in the quarter ended June 2021 were in fact completed much earlier. This was a case of delayed information. Since we had no news of completion of these projects earlier, we had moved their completion dates ahead into the future. But, the new information tells us that these were in fact already commissioned earlier. The total value of these 15 projects is Rs.88 billion. Past data has been revised appropriately to reflect this information. Implementation of three real estate projects that were expected to be completed in the quarter of June 2021 was stalled.

These data minefields apart, it is evident that the project completions expected have been reduced substantially.

308 projects involving investments of over Rs.310 billion that were expected to be completed in the quarter ended June 2021 but the information on completion is still not available are expected to be marked as completed during this quarter. This would be in addition to the 245 projects worth Rs.507 billion which have already been marked as completed.

Besides, 711 projects involving an investment of Rs.277 billion that were supposed to be completed in fiscal 2020-21 have spilled over into the first quarter of 2021-22. Thus, we expect completions in the quarter of June 2021 to eventually reach about Rs.1.1 trillion. This would be comparable to the Rs.1 trillion worth of completions recorded in the March 2021 quarter. But, there could be surprises that could rein in the worth of projects completed in June 2021 to be lower than Rs.1 trillion. This caution emanates from the continued uncertainty around the pace of India’s recovery from the Covid-19 contraction of 2020-21.

Fiscal 2020-21 ended with a completion of projects worth Rs.3.1 trillion. This of course, compares poorly with the Rs.5.2 trillion worth of completions in 2019-20 which in turn was much lower than the Rs.6.5 trillion worth of completions in 2018-19.

The rate of completion of projects has been falling. The value of completion of projects as a per cent of value of projects under implementation was 7.7 per cent in 2006-07. This fell to 3.9 per cent by 2013-14 before it recovered to 6 per cent in 2016-17. But, then it started declining again. In 2020-21, the rate of completion of projects was 2.5 per cent.

Information on projects has been drying at an alarming rate. CMIE’s CapEx team makes persistent efforts to reach out to project managers or sponsors to ascertain the status of projects. If no information is forthcoming for over 30 months for non-infrastructure projects and for over 36 months (3 years) for infrastructure projects then such projects are removed from the list of live projects. In the quarter ended June 2021, the CMIE CapEx team had to remove projects worth Rs.3.4 trillion because of lack of information on these.

Largely because of this, the pipeline of projects in the CapEx database shrunk from Rs.209 trillion at the end of March 2021 to Rs.207 trillion at the end of June 2021. This deletion of projects does not reduce the value of projects in the Under Implementation stage. This in fact, increased from Rs.123 trillion at the end of the March 2021 to R.124.8 trillion at the end of June 2021.

Unemployment Rate (30-DAY MVG. AVG.)
Per cent
7.5 -1.4
Consumer Sentiments Index
Base September-December 2015
57.8 +0.3
Consumer Expectations Index
Base September-December 2015
60.1 +0.5
Current Economic Conditions Index
Base September-December 2015
54.3 0.0
Quarterly CapEx Aggregates
(Rs.trillion) Sep 20 Dec 20 Mar 21 Jun 21
New projects 2.53 1.42 2.11 2.72
Completed projects 0.77 0.86 1.15 0.70
Stalled projects 0.08 0.31 0.26 0.32
Revived projects 0.27 0.15 0.22 0.12
Implementation stalled projects 0.09 0.20 0.32 0.25
Updated on: 19 Sep 2021 9:28AM
Quarterly Financials of Listed Companies
(% change) Sep 20 Dec 20 Mar 21 Jun 21
All listed Companies
 Income -6.3 1.6 14.9 42.2
 Expenses -10.3 0.1 7.2 42.2
 Net profit 47.9 58.1 325.4 128.6
 PAT margin (%) 8.4 8.4 8.9 9.1
 Count of Cos. 4,429 4,449 4,351 4,316
Non-financial Companies
 Income -10.5 0.2 17.5 61.1
 Expenses -14.2 -0.8 10.3 62.9
 Net profit 31.8 54.6 233.6 184.7
 PAT margin (%) 8.1 8.8 9.1 8.6
 Net fixed assets 5.9 2.3
 Current assets 0.8 4.6
 Current liabilities -1.8 0.7
 Borrowings 8.5 -4.2
 Reserves & surplus 3.7 12.0
 Count of Cos. 3,282 3,303 3,248 3,233
Numbers are net of P&E
Updated on: 19 Sep 2021 9:28AM
Annual Financials of All Companies
(% change) FY19 FY20 FY21
All Companies
 Income 13.3 0.2 -0.4
 Expenses 13.6 0.1 -2.9
 Net profit 15.2 -10.4 48.3
 PAT margin (%) 2.1 2.1 7.6
 Assets 9.8 8.5 13.9
 Net worth 8.5 4.4 16.0
 RONW (%) 3.8 3.5 9.5
 Count of Cos. 31,664 30,513 3,698
Non-financial Companies
 Income 14.0 -1.7 -3.0
 Expenses 14.2 -1.4 -4.8
 Net profit 21.4 -21.2 30.9
 PAT margin (%) 2.9 2.3 7.3
 Net fixed assets 5.6 10.0 3.4
 Net worth 7.9 2.1 14.4
 RONW (%) 6.4 4.9 11.0
 Debt / Equity (times) 1.0 1.1 0.5
 Interest cover (times) 2.3 1.9 4.6
 Net working capital cycle (days) 74 81 59
 Count of Cos. 25,365 24,409 2,691
Numbers are net of P&E
Updated on: 12 Sep 2021 7:10PM