India Infrastructure: Q3 blues on project announcements

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Updated: January 11, 2016 1:15:15 AM

New project announcements fell sharply in both government and private sectors, with the absolute figures being the lowest since Modi came to power

In the 53rd edition of India Infrastructure Insights, we once again look at new project announcements, completions & stalled projects in CMIE’s capex database (updated to 31 December 2015)
* New project announcements collapse in Q3FY16: New project announcements at ~R1.05trn fell 74%y-o-y/65% q-o-q in third quarter of FY16. This was the lowest absolute quantum of new project announcements post June 14 and the formation of the new government. In the first nine months of the current financial year new project announcements are down 34% y-o-y. A sharp decline in the first three months of FY16 and first nine months of this fiscal in new project announcements points to lack of capex recovery on ground especially in large-scale industrial projects.
* Both government and private sector project announcements fell sharply: Government new project announcements fell 83% y-o-y/62% q-o-q in the third quarter. Private new project announcements fell 66% y-o-y/67% q-o-q. Even the YTD run rate of both government and private new project announcements remains quite weak. Government new project announcements have declined 52% y-o-y while private new project announcements have fallen 16% y-o-y in first nine months of financial year 2016.
* Stalled projects at all-time high level:  Stalled projects (both in absolute terms and as a percentage of under implementation projects) continues to remain high. The absolute quantum continues to inch up. Under implementation but stalled increased by 11% y-o-y/3% q-o-q in third quarter of FY16.
* Decline in pace of completion: Completed projects slumped 49% y-o-y /27% q-o-q in Q3FY16. However, project completion data are quite lumpy and concentrated in the fourth quarter of fiscal year. 9MFY16 project completion is down marginally (~3% y-o-y).
* Roads, railways, defence and solar are the oasis in the capex desert: Industrial capex remains quite weak with largest drivers like thermal power, metals and cements suffering from over-capacity. Property demand remains extremely weak. In the infrastructure sector, capex has picked up quite sharply in roads and solar while railways and defence have long-term promise. We believe that a broadbased revival is going to take more time.
* Top Picks—Industrials: Bharat Electronics and Crompton Greaves.

Infrastructure: Adani Port. Electric Utilities: PGCIL and NTPC

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