Comeback trail

Fresh investments by India Inc show signs of revival

Confidence comes not from always being right but from not fearing to be wrong, goes the saying. And it seems that India Inc is thinking on similar lines as it fights the blues of the catastrophic October quarter.
Thanks to the various stimulus packages undertaken by the government and aggressive rate cuts by Reserve Bank of India, the amount of fresh investments outlined by corporate India has increased by 12 per cent to Rs 1.5 lakh crore over the December 2008 quarter. Further, the amount of projects shelved declined by 80 per cent to Rs 24,225 crore.
To put things in perspective, in the December 2008 quarter, the amount of projects shelved jumped fi ve- fold to Rs 1.25 lakh crore over and above tripling of shelved projects seen in September 2008 quarter (Rs 27,145 crore).
Says Shashikant Hegde, director and CEO, Projects Today, “ We expect the trend of moderate pace in project investments to continue till September 2009 after which we could see some revival.” Expectations of normal monsoons, a new government in place and cap on any further interest rate hikes will start to play out.
Concurs Mahesh Vyas, managing director and CEO of CMIE, India Inc feels corporates are not showing signs of going slow on new investment projects or the pace at which they are completing their projects.
According to Vyas, the CapEx database suggests that the momentum will continue in FY10. Over a thousand projects, involving a total investment of Rs 490,000 crore, are scheduled to be commissioned during the fiscal – more than twice the project completions witnessed in FY09. Around 40 per cent of these investments are concentrated in just the top 40 projects.
However, despite the revival, the overall pace of growth is unlikely to be rapid. Total project investments have been growing at an average of 25.5 per cent over the past three financial years. Adds Hegde, “ The overall growth in investments in FY10 is likely to be in the range of 10- 15 per cent, which is still a decent growth.”
In fact, the March quarters results of ABB and Siemens tend to prove this fact. While ABB’s order inflow in the March 2009 quarter jumped 82 per cent q- o- q, Siemens witnessed a marginal decline of 6 per cent over the December 2008 quarter. Even Hindustan Construction Company reported doubling of order inflows to Rs 5,200 crore in the quarter.
However analysts feel private sector capacity addition plans in metals, O& G, and cement verticals are likely to lag improvement in the macro- economic scenario. Further, the delay in execution of the current order backlog from the private sector is likely to become fully apparent only in second half of FY10. “ Thus, we believe even as public sector- backed spending in the power and infrastructure sectors could support the order backlog, disappointment from slowdown in order intake in the second half of FY09 is likely to reflect in revenues the second half of the current fiscal,” points an Edelweiss report.
Investors thinking of taking a plunge into capital goods and construction companies should track the stocks closely and wait for the companies’ directions for the beginning of a strong traction in order inflows to get an upside on their investments.

Fresh Investments Projects Shelved*
Qtr Projects Value* Projects Value*
Jun-08 3602 337 66 8
Sep-08 3510 242 125 27
Dec-08 2764 134 180 125
Mar-09 2657 150 205 24
Source: ProjectsToday; *(Rs cr '000)  Note: Include projects abandoned, shelved, deferred

Published in Outlook Profit issue date 29 May 2009