New investment announcements lose momentum

by Mahesh Vyas

Media reports suggest that India is on the cusp of a multi-year capex cycle reminiscent of the 2003-12 years. Data does not support such a view. New investment proposals have fallen from their level in 2015 and, they continue to fall. New investment proposals per quarter averaged at Rs.6 trillion in 2014-15 and 2015-16. This fell to Rs.4.8 trillion in 2016-17 and then to Rs.4 trillion in 2017-18. In 2018-19 and 2019-20, it was Rs.4.2 trillion per quarter. New investment proposals per quarter therefore had fallen by 30 per cent in six years till before the Covid-19 pandemic. The fall in the year of the pandemic was a dramatic 55 per cent. New investment proposals per quarter fell to Rs.1.9 trillion. The situation in the first two quarters of 2021-22 is not much better at Rs.1.8 trillion per quarter.

As the data shows, new investment proposals have been falling relentlessly over the past six years. And, the new data do not show any change either. On the contrary, a slow recovery that was underway since the pandemic quarter of June 2020 seems to have lost a little momentum. Therefore, we do not see any upward capex cycle, yet.

During the quarter ended September 30, 2021, CMIE’s capex monitoring machinery captured 348 projects that intend to invest trillion into the creation of new productive capacities in India. While we expect these numbers to undergo substantial upward revisions in the coming months, they seem to suggest that the falling trend in new investment proposals continues unabated.

To overcome vitiation of comparisons because of revisions, we compare the first release of new investments in a quarter with first release made in earlier quarters. CMIE makes the first release of new investments in a quarter immediately after the completion of a quarter. The comparison makes sense because there are large revisions after the first release.

As a first release, a one trillion rupee investment is about 50 per cent lower than the first release of new investment proposals for the quarters ended in March 2021 and June 2021. The first release for these two quarters was Rs. 1.2 trillion and Rs.1.55 trillion, respectively. The small recovery in new investment announcements seen in the March and June 2021 quarters was not sustained in the September 2021 quarter. The momentum in the first release from Rs. 0.56 trillion in June 2020 through Rs.1.55 trillion in June 2021 petered out in September 2021.

The first release for the quarter ended September 2021 though is much better than the experience in the three quarters impacted immediately after the outbreak of the Covid-19 pandemic. The first release of new investment proposals were Rs.0.56 trillion in the quarter ended June 2020, Rs.0.59 trillion in the quarter ended September 2020 and Rs.0.8 trillion in the quarter ended December 2020.

Much of the new investment proposals made during the quarter ended September 2021 were in the power sector. Over 44 per cent of the new investment proposals are from this sector. The largest investment in the sector, and also during the quarter, is by JSW Energy. The company has signed two Memoranda of Understanding with the Maharashtra government to set up a 1,500 MW hydro power project near Igatpuri in Nashik district and a 5,000 MW wind power project across 1,870 hectares of land in Kohlapur, Solapur, Satara and Osmanabad districts. The collective investment across all these projects is Rs.55 billion.

The next large new investment proposal comes from EverYondr a joint venture between Yondr Group, a global data centre developer and service provider, and Everstone Group. They propose to invest a billion US dollars to set up data centres across metros. The first one is being set up in Mumbai.

This JSW project alone accounts for 77 per cent of all investments proposed in the power sector and 34 per cent of all projects proposed in the quarter. The three largest projects announced during the September 2021 quarter accounted for 45 per cent of all investment proposals during the quarter. This is the second consecutive quarter when there is substantial concentration of the total investment in just the top three projects. In the June 2021 quarter the concentration was higher at 57 per cent. In the March 2021 quarter it was 33 per cent. A revival in the investment climate is expected to generate many more large investment proposals than just a handful.

Media reports that suggest an impending capex cycle also suggest that this would be led initially by government spending. Data do not support this either. Nearly 85 per cent of all new investment proposals in the September 2021 quarter were from the private sector. This proportion was 82 per cent in the June 2021 quarter, 69 per cent in the March 2021 quarter and 76 per cent in the December 2020 quarter. The government has been conspicuous by its absence in proposing capex spending during the period of economic contraction. Only 33 per cent of all new investment proposals made since the quarter ended June 2020 were by government bodies. Nearly two-thirds are from the private sector.

Investment proposals by both, public and private sector fell in 2020-21 compared to 2019-20 but the fall in the public sector is much larger than in the private sector. Private sector investment proposals fell by 46 per cent but those by public sector fell by 62 per cent.

Unemployment Rate (30-DAY MVG. AVG.)
Per cent
7.7 +0.4
Consumer Sentiments Index
Base September-December 2015
58.2 +0.3
Consumer Expectations Index
Base September-December 2015
60.6 0.0
Current Economic Conditions Index
Base September-December 2015
54.3 +0.8
Quarterly CapEx Aggregates
(Rs.trillion) Dec 20 Mar 21 Jun 21 Sep 21
New projects 1.50 2.20 2.55 1.11
Completed projects 0.87 1.17 0.73 0.93
Stalled projects 0.30 0.26 0.32 0.03
Revived projects 0.15 0.22 0.12 0.19
Implementation stalled projects 0.20 0.32 0.25 0.21
Updated on: 24 Oct 2021 3:28PM
Quarterly Financials of Listed Companies
(% change) Dec 20 Mar 21 Jun 21 Sep 21
All listed Companies
 Income 1.6 14.9 41.9 27.2
 Expenses 0.1 7.3 42.1 27.6
 Net profit 58.3 326.2 124.9 34.3
 PAT margin (%) 8.4 8.9 8.9 14.5
 Count of Cos. 4,451 4,364 4,352 320
Non-financial Companies
 Income 0.1 17.4 60.7 34.9
 Expenses -0.7 10.5 62.8 36.7
 Net profit 52.4 221.6 179.7 36.9
 PAT margin (%) 8.8 9.1 8.4 13.8
 Net fixed assets 2.3 8.9
 Current assets 4.4 28.6
 Current liabilities 0.8 9.7
 Borrowings -4.3 8.9
 Reserves & surplus 11.9 13.0
 Count of Cos. 3,299 3,252 3,251 233
Numbers are net of P&E
Updated on: 24 Oct 2021 3:28PM
Annual Financials of All Companies
(% change) FY19 FY20 FY21
All Companies
 Income 13.3 0.2 -1.7
 Expenses 13.6 0.2 -4.3
 Net profit 15.2 -10.4 50.0
 PAT margin (%) 2.1 2.1 7.3
 Assets 9.8 8.5 12.9
 Net worth 8.5 4.5 13.7
 RONW (%) 3.8 3.5 9.0
 Count of Cos. 32,100 31,012 5,853
Non-financial Companies
 Income 14.0 -1.7 -4.1
 Expenses 14.2 -1.4 -6.2
 Net profit 21.2 -21.2 37.6
 PAT margin (%) 2.9 2.3 6.8
 Net fixed assets 5.6 10.0 2.6
 Net worth 7.9 2.1 11.6
 RONW (%) 6.4 4.9 9.9
 Debt / Equity (times) 1.0 1.1 0.7
 Interest cover (times) 2.3 1.9 3.7
 Net working capital cycle (days) 74 81 70
 Count of Cos. 25,659 24,739 4,261
Numbers are net of P&E
Updated on: 19 Oct 2021 1:55PM