Expecting a pick-up in project completions

by Mahesh Vyas

Projects set up to create new productive capacities worth Rs.846 billion were completed during the quarter ended September 2021. This compares well with the record on this count in recent quarters. For example, it compares well with the Rs.710 billion worth of completions accomplished in the preceding, June 2021 quarter. It is also better than the average Rs.777 billion worth of investments commissioned in the preceding five quarters.

The Rs.846 billion is the first release of the estimate of project completions during the quarter ended September 2021. This will be revised upwards continuously as new information becomes available through the next few months. For example, the first release for the June 2021 quarter was Rs.507 billion. This has since risen to Rs.710 billion and that for the quarter of March 2021 has risen from Rs.537 billion to Rs.1,166 billion.

To overcome the complications in comparing data of different levels of data revisions we compare the first release of estimates project completions during a quarter. In this respect, completions during the September 2021 compare very well with all six quarters from the one ended in March 2020. The average first release was Rs.447 billion and none of the quarters crossed the Rs.846 billion mark of the September 2021 quarter.

While completions during the quarter ended September 2021 therefore compare well with the record of the recent past, completions are still very low compared to their levels before the pandemic and they are also low compared to expectations. Total investments in the first two quarters of 2021-22 add up to a meagre Rs.1.55 trillion. In comparison, before the pandemic, completions during two consecutive quarters averaged Rs.2.8 trillion. Therefore, project completions have still not recovered to their pre-pandemic levels.

The completion record continues to disappoint. For example, projects worth Rs.2 trillion were expected to be completed during the quarter ended June 2021. These expectations are based largely on statements made by promoters or implementers of the expected completion date of their projects. This was the expectation in March 2021. Now, by the end of September 2021 we see completions reaching only Rs.0.7 trillion. Further, expectations have narrowed down to only about a trillion rupees worth of projects being completed in that quarter.

The expectation was that projects worth Rs.1.9 trillion would be completed during the quarter ended September 2021. But in reality only Rs.0.85 trillion were completed. Further, now the expectation for this quarter has been scaled down. We expect only Rs.1.5 trillion worth of projects to have been completed during the quarter ended September 2021.

Available data suggest that projects worth Rs.2.61 trillion would be completed in the quarter ended December 2021 and another Rs.2.37 trillion worth of projects would be completed in the quarter ended March 2022. Project completions could reach Rs.7.5 trillion in 2021-22.

Most completions are in the infrastructure industries. Transport services, which includes the building of roads, railways, airways and ports collectively accounted for 68 per cent of all total completions in the quarter ended September 2021. In the June 2021 quarter, it was transport services and electricity that collectively accounted for 54 per cent of the total completion of projects.

Building roads is by far the largest capex in India. In 2020-21, roads projects worth Rs.1 trillion were completed. We expect this to go up to Rs.1.27 trillion in 2021-22. Railways saw a large Rs.377 billion Delhi Metro Phase 3 project being completed in the September 2021 quarter. The total completions of railway projects in 2021-22 is expected to rise to Rs.744 billion compared to Rs.153 billion in 2020-21.

Conventional electricity is expected to see investments worth Rs.928 billion getting completed in 2021-22. In 2020-21, completions in this industry added to Rs.736 billion. Most projects are reported to be 75-90 per cent complete. This raises the possibility of their commissioning during the current year. In renewable electricity, projects worth Rs.1 trillion are scheduled for completion this year. The quarter ended June 2021 saw completions worth Rs.125 billion and September 2021 saw another Rs.41 billion worth of these projects being completed. We expect total completions to reach Rs.519 billion by the end of the year.

We also expect a substantial pick-up in completion of real estate projects. These were impacted by the Covid-19 induced lockdowns. As a result, completions were only of Rs.133 billion in 2020-21. We expect this to shoot up to Rs.887 billion in 2021-22. Even after this, completions would be lower than what was clocked in 2018-19 and 2019-20. Steel projects worth Rs.411 billion are expected to be completed in 2021-22.

These six sectors are expected to see completion of projects worth Rs.4.8 trillion during 2021-22. These are the sectors that usually see the largest time overruns. In fact, most of the completions scheduled in these sectors this year are overdue projects that have spilled over from their past completion dates.

We believe that time overruns could continue and the final completion of projects in 2021-22 would be less than Rs.6 trillion. Project completions have never crossed Rs.6.5 trillion, not even during the last upturn in the capex cycle. Completion of investment projects had ramped up well in 2015-16 to reach Rs.5.91 trillion and then they peaked at Rs.6.53 trillion in 2016-17. But, they could not rise beyond this level. Completions fell to Rs.4.84 trillion in 2017-18 and could recover only up to Rs.6.47 trillion in 2018-19.

A completion of projects anywhere close to Rs.6 trillion would still be much better than the Rs.3.1 trillion worth of completions seen in 2020-21 or the Rs.5 trillion recorded in 2019-20. But, it would be less than the achievements in 2016-17 and 2018-19.

We will keep a close watch on the developments.

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