EUR 120.00 For Business Accounts Only

MOSL: CAPITAL GOODS-New project announcements decline sharply in 4Q19

Capital Goods: New project announcements decline sharply in 4Q19; Weakness witnessed across segments

 

We highlight key takeaways from the capex data released by the Centre for Monitoring Indian Economy (CMIE), which we use as a proxy for the Indian capex cycle. The CMIE tracks projects across various stages of announcements, implementations and completions, taking into account stalled/shelved projects. 

New project announcements decline sharply

• New project announcements declined sharply by 54% YoY to INR2.0t in 4QFY19, impacted by weakness across segments. Rising policy uncertainties ahead of the general elections and the current liquidity tightness prevailing in the economy have added to the turmoil. Manufacturing declined 46% YoY (INR608b), Services declined 47% YoY (INR717b) and Construction & Real Estate projects declined 82% YoY (INR54b).
• Key new projects announced during the quarter were mainly from the state governments, which include (a) BASF acrylics value chain project (INR160b), (b) Solar projects from SECI (INR423b), and (c) Bio chem project of bio refinery and ethylene project (INR30b).
• Private sector project announcements declined 51% YoY to INR1.2t in the quarter. Private sector projects accounted for 63% of the new projects announced in 4QFY19. Government project announcements dropped 60% YoY to INR738b (central government projects contributed 22%, the lowest contribution in the last 23 years; balance was contributed by state and local governments) in 4QFY19. For FY19, private sector projects contributed 67% to the new projects announced, highest since FY11 in percentage terms, though on a lower base.
• For FY19, new project announcements declined 17% YoY to INR9.5t impacted by Electricity (-28% YoY), Construction & Real Estate (-29% YoY) and the Services segment (-20% YoY). For FY19, Government project announcements declined 40% YoY to INR3.1t, partly offset by increased private sector announcements (+4% YoY to INR6.3t).