The number of private sector projects to which banks and financial institutions (FIs) sanctioned loans rose 58% year-on-year (y-o-y) in FY17, according to the Reserve Bank of India (RBI). In a report released as part of its monthly bulletin for September 2017, the central bank said 547 projects with a total cost of Rs 1.83 lakh crore were sanctioned financial assistance by banks and FIs in FY17, as against 346 projects worth Rs 91,800 crore in FY16.
“In addition, ECBs (external commercial borrowings)/FCCBs (foreign currency convertible bonds) to the tune of Rs 22,400 crore) were contracted by 346 companies and 29 companies, which did not avail of financing from the banks/FIs, raised Rs 1,200 crore for their capex needs through domestic equity issues,” the RBI said in the report.
In all, 922 companies made investment plans aggregating Rs 2.06 lakh crore in FY17, as against 700 companies with investment intentions totalling Rs 1.35 lakh crore in FY16.
The report also highlighted that the rise in loan sanctions did not translate into a commensurate increase in the envisaged capex because of a large share of high-value and mega projects where expenditure is spread over years. Mega projects, defined as projects worth Rs 5,000 crore or more, constituted 17% of the total project cost. Projects worth between Rs 1,000 crore and Rs 5,000 crore, known as high-value projects, accounted for 42% of the pie.
About Rs 72,800 crore, or 40% of the total proposed expenditure, would be spent in FY17, Rs 42,000 crore, or 23% in FY18, and Rs 37,200 crore, or 20%, thereafter.
Private placement of debt and foreign direct investment (FDI) have gained prominence as alternative sources of capex financing, the report noted, with fundraising through the former route rising 33% y-o-y to `1.56 lakh crore in FY17. FDI inflows, including equity, re-invested earnings and other capital, rose 11.2% to Rs 2.92 lakh crore.
Infrastructure projects — comprising power, construction, roads and bridges, ports and airports — accounted for 70% of the total cost of projects sanctioned in FY17.
The central bank said the near-term outlook for fresh investment seems to be improving, with continued interest in commissioning power and construction projects in the first half of FY18 and the push coming from FDI and private placement of debt.
“Although there was a seasonal drop in new project announcements in Q1, the investment climate may improve in subsequent quarters in view of business sentiment polled in various surveys and policy initiatives on the GST and FDI,” the RBI observed.
Based on the projects sanctioned in preceding years, the planned capex could amount to Rs 69,400 crore in FY18. An additional Rs 85,400 crore worth of capex would have to come from new investment intentions to match the level estimated for FY17, the central bank said.