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85th Survey of Projects Investment in India  State capex key to reversal of trend
By Mr. Shashikant Hegde, CEO, Projects Today

A rapid fall in the number of COVID-19 cases and the relaxation in the lockdown rules by many states, allowed the Indian corporate sector to resume business activities on full scale in the last quarter of FY2022. Further, the revival signs seen in the economy and an increase in the capacity utilisation ratio made the Indian private sector increase its investment intentions further in the last quarter of fiscal 2022.

As against 2,719 new projects worth Rs 4,14,415 crore announced in Q3/FY22, the last quarter of fiscal 2022 saw announcement of 2,467 new projects worth Rs 5,46,674 crore. Despite attracting 252 less number of new projects during the last quarter, the presence of more super mega projects (investment of Rs 10,000 crore or more) saw the total fresh investment increase by 31.91 percent on a Q-o-Q basis.

In this Survey, we have tried to gauge the yearly fresh investment trends by comparing the capex figures of FY2022 with the similar statistics of FY2020 (pre-COVID year).

Fresh Projex: FY2022

The revival in investment intentions in the traditional sectors like Petrochemicals, Steel, Cement and Automobiles coupled with the announcement of a good amount of fresh investment in the Sunrise industries like Electronics, E-vehicles, Data Centres, Solar power and Warehousing saw a healthy surge in fresh investment in FY2022. As observed in our earlier surveys, the surge was led by the private sector.

In all, fiscal 2022 saw a record fresh investment announcement in the country in the years. During the just concluded fiscal, 10,445 new projects entailing a total investment of Rs 19,27,214 crore were announced.  When compared with the similar figures for FY2020, this indicated an increase of 77.5 percent. During FY2020, in all 9,307 new projects worth Rs 10,85,731 crore were announced.FreshProjex-Sectors

Projex by Ownership

Though all-out efforts are on by the Union government to revive capital expenditure activities in the public sector at both central and state levels, fresh investment activities are yet to pick up the desired pace. On the other hand, the private sector, including both Indian and foreign companies, seems to be keen to cover up the setbacks it suffered in the last two years due to the pandemic induced nationwide lockup.

Reflecting the positive mood of the private sector, its share in the total fresh investment increased from 48.66 percent in FY2020 to 50.66 percent in FY2021 and to 68.89 percent in FY2022. The new investment proposals were spread not only across traditional sectors but also in a number of Sunrise sectors.

During fiscal 2022, 4,745 new projects with a total investment commitment of Rs 13,27,564 crore were announced. Compared with FY2020 statistics this indicated a growth of 144.39 percent.

In addition to the core sector, increased private investment was seen in Sunrise industries like Green energy, Electric vehicles, Lithium batteries, Data centers and Warehousing. Among the core sectors, Steel, Cement, Petrochemicals and Automobiles cornered a big chunk of the private investment. Further, Real Estate, Commercial Complexes, Pharma and Healthcare sectors too attracted private investors’ attention in FY2022.

The government sector with limited financial resources concentrated on infrastructure (Transport & Social) and Mining projects. In all, 5,700 new projects worth Rs 5,99,650 crore were announced by the government-owned agencies. On a Y-o-Y basis, fresh investment in the central government segment increased by 22.80 percent and the same increased by a meager 6.35 percent in the state government segment. Government investments were channeled into infrastructure sectors like Roadways, Mining, Power Distribution and Community services.FreshProjex-Ownership

Projex by Sectors

Manufacturing: The Manufacturing sector, where capacity building activities had taken a backseat in the past several years, attracted the highest amount of fresh investment in FY2022. In all, 2,759 new projects with an aggregate investment of Rs 8,08,159 crore accounted for 41.93 percent of the total fresh investment announced in FY2022. Its share in total fresh investment was just 13.31 percent in FY2020.

The private sector, with a total investment commitment of Rs 7,92,972 crore, owned around 98 percent of the total fresh investment seen in this sector. Further, of the 299 mega projects (capex of Rs 1,000 crore or more) announced in FY2022, 98 projects worth Rs 6,00,206 crore were in this major sector.

The fresh capex was widespread across the sub-sectors like Cement, Petrochemicals, Steel, Machinery and Automobiles (including Electric Vehicles and Lithium Ion batteries).

Among the core sectors, Cement attracted 83 new projects worth Rs 39,478 crore, Iron & Steel saw 281 projects worth Rs 2,65,495 crore, Machinery sector got 203 projects worth Rs 1,19,670 crore and Automobiles including Ancillaries sector attracted 103 projects worth Rs 42,677 crore.

Mining: In the mining sector, 135 new mining development projects worth Rs 68,090 crore were announced. This included 45 Coal mine development projects and 33 Iron ore mine development projects.

Barring a couple of private coal mining projects by the Adani, Birla and Tata groups, bulk of the new investment was proposed by the central government-owned Coal India and its subsidiaries.

The reverse was the case in the Iron ore development projects. Of the 13 new projects worth Rs 19,751 crore, only two were by the state-owned Odisha Mining Corpn. A Rs 4,075 crore project of Rungta Mines was the largest private project announced during FY2022.

Power: The dominance of Solar based power projects continued in FY2022 too. Of the 222 new projects announced in the non-conventional power sector, 187 projects worth Rs 63,213 crore were Solar power projects. These projects when successfully implemented would add generation capacity of over 16,000 MW. FY2021 had seen announcement of 151 Solar power projects worth Rs 60,332 crore.

In the conventional power sector, the hydel power project sector attracted 18 projects entailing a total investment of Rs 52,975 crore in FY2022. Of this, six were mega projects worth Rs 51,240 crore. Of the 18 projects, nine were by private promoters, which included mega projects of Greenko Energies, JSW Neo, Semalia Energy and Naba Power. The declining trend in new projects in the thermal power project continued in FY2022.

Infrastructure: Reflecting the slowdown in the capital expenditure plans of state government units, the total fresh investment committed in the Services & Utilities (Social and Transport Infrastructure) increased by 20.78 percent over FY2020. As a result, its share in the total fresh investment decreased sharply from 67.74 percent in FY2020 to 46.09 percent in FY2022.

While sectors like Roadways, Oil and Gas pipeline, Power Distribution, Storage and Warehouses, Data Centres saw healthy increases in the flow of fresh investment, sectors like Railways, Water Supply and Shipping Infrastructure saw a fall in fresh investment over FY2020.

Though roadbuilding activities slowed down during the lockdown period, announcement of new highways and roadways projects by the National Highways Authority of India (NHAI), National Highways & Infrastructure Devp. Corpn. (NHIDCL) and various Public Works Departments (PWD) at the states level continued at the usual pace. In all 1,611 new roadways projects with an investment of Rs 2,51,796 crore were announced in FY2022.

Nearly half of the total fresh investment seen in the Roadways sector was initiated by the NHAI. While NHAI announced 183 new projects involving a total investment of Rs 1,19,557 crore, NHIDCL announced 51 new roadways projects worth Rs 11,691 crore. Most of the remaining projects were announced by state-owned agencies.

In FY 2022, NHAI floated 784 project tenders worth Rs 1,23,172 crore to ground its highway projects by awarding the same to private contractors. NHAI also finalized 205 highways contracts with an aggregate value of Rs 1,40,020.58 crore.Top-5-NHAI

The two mega airport projects announced in this segment were by the Adani group. The group plans to expand the Ahmedabad International Airport capacity by investing Rs 18,000 crore and that of Mangaluru Airport at Rs 5,200 crore.

Construction: The Construction sector comprising Real Estate, Commercial Complexes and Industrial Parks saw a growth of 34.56 percent in terms of fresh investment over FY2020.

Of the three segments, while Industrial Parks and Real Estate registered positive growths of 52.66 percent and 49.4 percent respectively, fresh investment in the Commercial Complexes fell short by 13.49 percent vis-a-vis FY2020 figures.

The Real Estate sector, which was badly hit by the nationwide lockdown and is saddled with huge unsold inventories, saw announcement of 1,540 new projects worth Rs 1,62,235 crore and registered a growth of 49.4 percent. While Projects Today covers Real Estate projects of major developers, it has been reported that revival in Real Estate activities has been observed in smaller cities too.

Irrigation: Funds starved state governments seem to have withheld their capital expenditure plans on new irrigation projects. The fresh outlay in this sector after increasing from Rs 23,862 crore in FY2020 to Rs 75,177 crore in FY2021 declined sharply to Rs 13,223 crore in FY2022.

Sunrise Sectors: Fiscal 2022 saw a surge in investment proposals in the Sunrise sectors like Electric Vehicles, Lithium Ion Batteries, Data Centres, Warehousing, etc.

While the largest investment proposal in this segment was by the Reliance Industries, which proposes to set up a Green Energy Giga complex at Jamnagar, Gujarat at a total investment of Rs 60,000 crore, other sectors like Data Centres, Electric Vehicles, Lithium Ion batteries, Solar Photovoltaic cells and Warehousing attracted good number of investments.

The most promising Electric vehicles sector attracted 28 new projects to manufacture four and two-wheelers at a total investment of Rs 13,456 crore. To complement this industry, 18 Lithium Ion battery manufacturing units were also announced at a cost of Rs 20,690 crore.

A Rs 3,100 crore Hansalpur Electric vehicles project of Suzuki Motor Gujarat, a Rs 2,500 crore Electric scooters project of Simple Energy were some of the mega projects announced in this sector.

To reduce the imports dependency of Solar power projects, 11 new Solar Photovoltaic Cells and Modules projects were taken up during FY2022 at a cost of Rs 7,384 crore. Of these, notable ones are a Rs 3,000 crore Solar Photovoltaic Cells project of Tata Power Solar in Tamil Nadu and a Rs 1,875 crore Solar Photovoltaic Modules Project of Shirdi Sai Electricals in Andhra Pradesh.

To enable software and telecom companies to store their data locally around 39 new Data Centres were initiated at a total cost of Rs 48,193 crore. Adani group, Microsoft Corpn. India, Nxtgen Infinite, STT Global Data Centres, Techno Electric & Engineering Co., ZR Power Holdings, Yondr group are some of the heavy investors in this segment.

To meet the increased demand of e-Commerce companies and exporters around 102 Warehouses, Cold storage, e-Commerce fulfillment centres, and Multimodal logistics parks are coming up across the country at a total investment of Rs 12,237 crore.

Projex By States

Supported by a couple of super mega investment initiatives announced by India’s top conglomerates like Mukesh Ambani, Adani and Arcelor Mittal groups, the western state, Gujarat ranked number one in terms of total fresh investment committed in FY2022. The state attracted 1,326 new projects with an aggregate investment commitment of Rs 4,47,435 crore. In other words, the state cornered around 23.22 percent of the total fresh investment and 29.94 percent of the total fresh private investment announced in FY2022.

The second ranked Maharashtra, though bagged more projects than Gujarat, had to settle with a total investment of Rs 1,89,372 crore. Maharashtra was followed by the southern state, Tamil Nadu with 521 new projects worth Rs 1,72,975 crore. The state ranked second in terms of private fresh Capex in FY2022.

Odisha (443 projects worth Rs 1,32,789 crore) and Karnataka (867 projects worth Rs 1,28,680 crore) bagged the fourth and fifth positions in the investment rank table.

Among the major states, Gujarat, Haryana, Karnataka, Maharashtra, Tamil Nadu, Telangana and Uttar Pradesh attracted bulk of the fresh investment planned in the Sunrise sectors.FreshProjex-Top10States

Outlook for FY2023

The buoyancy seen in the announcement of new projects in FY2022 is most welcome. The country badly needs huge Capex spending at this point in time to ensure a sustained economic recovery with increased employment openings at the earliest.

However, the worrying factor is the slow pace of capex spending by the government sector, especially at the states level. Unless the government spending on infrastructure catches up fast, most of the private mega private projects will remain on the drawing board.

Projects Today expects the promised capex spend by the Central government on infrastructure projects listed in the NIP to gain traction in FY2023. This is required to keep intact the animal spirit displayed by the private sector in announcing new projects in FY2022.

At the states level, the capex spending will continue to be subdued at least in the first half of FY2023.

Along with upping their capital expenditure pace, the government agencies are also expected to provide a congenial environment to the private players to ground their projects, especially the mega ones, with little delays. In India, mega projects are delayed due to land issues, environmental clearance issues, opposition from local populations cum local political parties, etc. Quicker grounding of mega projects would instill confidence in both Indian as well as foreign companies to commit more investment proposals in India.

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