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Survey Highlights:

  • Revival seen in the private sector investment in Q1 spilled over to Q2
  • Central government stepped up its projex spending
  • Slowdown seen in state government-sponsored projex
  • Odisha, the most beneficiary state of fresh investment
  • Andhra Pradesh attracted the highest private fresh projex
  • After several lull quarters, projex revival seen in the Mining sector
  • Mega projects in the Manufacturing sector reflect signs of revival
  • Steel, cement, aluminium, automobiles and electronics attracted private investment
  • Distressed thermal power projects face the heat of RBI guidelines
  • Solar project promoters in a confused state
  • Fresh projex from a couple of states to slow down further due to elections in December 2018
  • Revival in construction activities, good monsoon and increase in rural demands augurs well for projex in India during 2018-19
Mr. Shashikant Hegde, CEO, Projects Today
Mr. Shashikant Hegde, CEO, Projects Today

The 72nd Projex Investment Survey of Projects Today reveals that 2,826 new projects worth Rs 3,07,137.24 crore were announced in the second quarter of the current fiscal (Q2/FY19). Increase in the share of the Manufacturing sector in total fresh projex and successive second quarter growth in private projex are major findings of the 72nd Projex Survey.

Fresh projex (projects expenditure) increased by an impressive 47.8 percent during Q2/FY19 as against a fall of 29.6 percent observed in Q1/FY19 on quarter-on-quarter basis. In Q1/FY19, 2,698 projects worth Rs 2,07,824 crore were announced. Further, the number of mega projects (investment of Rs 1,000 crore or more) also increased from 36 in Q1/FY19 to 40 in Q2/FY19. Mega projects reflect confidence of project promoters to commit more funds in the prevailing investment environment.

Private projex growth rate impressive

The private sector announced 226 more new projects in Q2/FY19 and showed signs of sustaining its increased fresh projex activities in Q2 too. As a result, fresh projex announced in Q2/FY19 increased by a healthy 35.3 percent on top of 21.1 percent growth recorded in Q1 of the current fiscal.

In all, the sector saw announcement of fresh investment to the tune of Rs 1,23,062.9 crore in the form of 869 projects. In Q1/FY19 private promoters had announced 643 new projects entailing a total investment of Rs 90,980.6 crore. Cement, steel, electronics, automobile ancillaries and construction sectors witnessed increased fresh private investment in Q2/FY19.

The three major South Indian states, Andhra Pradesh, Karnataka and Telangana, were the top three states favoured by private promoters.

In all, 25 mega projects were announced by private companies in Q2/FY19. Of these, Rs 15,000 crore telephone equipment project of Reliance Industries Jio was the largest. Greenko Solar Energy’s Rs 7,000 crore solar power project in Karnataka; Gulf Petrochem’s Rs 3,600 crore bitumen refinery project in Gujarat and StreamCloud’s Rs 2,200 crore data centre in Maharashtra were the other prominent private projects announced during this quarter.

The 15.9 percent fall in fresh investment by the state-owned agencies was fairly compensated by the Central government-owned entities. As a result, the total fresh projex by the government sector increased by a healthy 57.5 percent in Q2/FY19 of the current fiscal. In Q1/19, fresh projex by the government sector had recorded a decline of 47.4 percent on Q-o-Q basis.

As against 2,052 government projects worth Rs 1,16,843.4 crore announced in Q1/FY19, around 1,957 new projects worth Rs 1,84,074.3 crore were announced in Q2/FY19. Aluminium, Petrochemicals, Railways, Roadways and Lignite Mining sectors saw large-size investment proposals from the government entities. The Dedicated Freight Corridor Corpn., National Aluminium Co, NLC India and the National Highways Authority of India announced mega investment plans during the latest quarter ended September 2018.

Sectoral Growth

The Infrastructure and Manufacturing sectors were the leaders in attracting fresh projex; the Electricity and Irrigation sectors were the laggards. The Mining sector saw new investment intentions being announced by sate-owned NLC India in Tamil Nadu.

Within the Manufacturing sector the spread of fresh projects was wider than what was observed in the earlier quarters. Sub-sectors like Petrochemicals, Refinery, Steel, Aluminium, Cement, Electronics and Auto Ancillaries attracted sizeable fresh investment during Q2/FY19.

The Mining sector, mired in policy setbacks and court orders, saw announcement of 33 new projects entailing a total investment of Rs 14,343.09 crore. An Rs 10,872 crore lignite mining project of NLC India in Tamil Nadu was the largest mining project announced in Q2/FY19.

A number of thermal power projects promoters are busy in salvaging their already set-up power plants due to rising bad debts and increasing pressure from lenders and the tough stand taken by RBI on the issue of referring such projects to NCLT. Non-availability of regular fuel supply arrangements, defaults in payments by state Discoms, increased cost of borrowings, huge debt and unclear policy have not only affected the recently commissioned thermal power projects, but have also forced project promoters to go slow on projects which are currently in planning and under-execution stages. According to the latest reports, 34 thermal power projects with an estimated debt of Rs 1.77 lakh crore are lined up to be referred to NCLT.

As against 59 new solar projects worth Rs 33,087.78 crore announced in Q1/FY19, only 32 new projects entailing a total investment of Rs 11,810.12 crore were announced in the quarter ended September 2018. The project promoters of solar projects are facing two major issues — hike in import duties on equipment and continuous falling tariffs. Reflecting this, new projex announcements came down in Q2/FY19. The government should address their concerns quickly so that its goal of achieving 20 GW from the Solar sector by 2020 is fulfilled. Non-availability of transmission lines is the other factor which has affected both Solar and Wind power projects.

The infrastructure sector, comprising social and transport infrastructure, accounted for 55.11 percent of fresh projex announced during Q2/FY19. The 2,239 new projects announced in this sector, mostly owned by government entities, are expected to bring in fresh investment to the tune of Rs 1,69,268 crore, indicating a growth of 68.3 percent on Q-o-Q basis. While bulk of the increase in projex can be attributed to the Rs 56,749 crore East Corridor projects announced by the Dedicated Freight Corridor Corporation of India, sectors like Hospitals, Water Supply schemes, Roadways, Commercial Complexes and Real Estate received sizeable fresh investments compared with the preceding quarter.

The national highways builder, NHAI, announced 26 new highways in Q2/FY19. Of these, the Rs 7,000 crore Ismailabad (Pehowa)-Charkhi Dadri-Narnaul Corridor Project was the largest. Post-monsoon, the highway building activities are expected to gather speed as the government intends to award 20,000 km and build 16,420 km new highways during FY19. The pace of road building has increased impressively in recent years from 12.05 km/day in 2013-14 to around 27 km/day in 2017-18. The ministry has set a rather steep goal of building 45 km/day during the current fiscal.

Real Estate and Commercial Complexes, where the private sector dominates, saw impressive increase in fresh projects investment during Q2/FY19. The sectors saw announcement of 482 new projects worth Rs 29,749.38 crore in Q2/FY19. Compared with the preceding quarters projex statistics, this indicated a growth of 27.5 percent.

Odisha on top

Odisha topped the fresh projex table by cornering around 12 percent of the total fresh projex announced in Q2/FY19. Twin projects of National Aluminium worth Rs 20,522 crore and a mega cement project of Dalmia Cement helped the state in heading the table. Andhra Pradesh with 166 new projects worth Rs 31,104 crore ranked second. It was followed by Karnataka, Maharashtra and Gujarat. Together, these five states garnered around 42.8 percent of the total fresh projex emanated in Q2/FY19.

Roadway

Andhra Pradesh, favourite of Private Promoters

Andhra Pradesh, traditionally one of the favourite investment destinations of the private sector, topped the table by bagging 78 new projects worth Rs 29,034 crores. Six of the 25 mega private projects (investment of Rs 1000 crore or more) are located in this state. Two other southern states – Karnataka (131 projects worth Rs 21,206 crore) and Telangana (116 projects worth Rs 15,540 crore) secured the second and third ranks.

Gujarat with 119 projects worth Rs 13,759 crore and Odisha with 38 projects worth Rs 9,029 crore completed the list of top five private-sector-friendly states. The top five states together accounted for nearly three-fourth of the fresh private investment announced in Q2/FY19.

Projex in 2018-19

The continued buoyancy seen in fresh projex announcements by the private sector in Q2/FY19 augurs well for fresh capacity addition activities in the country. Good monsoon stabilized GST regime, revival in rural demand for consumer goods and sustained government spending on highways building and other related infrastructures should see further pick-up in project investment activities in coming quarters.

Having said that, the falling rupee, rising oil prices and the fear of hike in interest rates are the challenges Indian project promoters will have to face in coming months. Further, the upcoming Assembly Elections in major states like Rajasthan, Madhya Pradesh, Chhattisgarh and Telangana will see a fall in state-sponsored fresh projex announcements in coming months.

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