Feb 24, 2009|
Economy: Trend in investments
Liquidity is a major concern corporate India is facing in present times. In addition, there are issues related to future demand and increasing inventory buildups. Delayed payments from customers leading to increasing working capital cycles have led companies to increase their debt (for working capital) levels in order to manage daily operations.
Liquidity and capital raising issues have led companies to think twice about their expansion and capex plans. Over the past few quarters, we have seen a drastic change in the nature of investments within the country as compared to the earlier high growth period.
While the growth in number of new projects has been slowing, the average size and value of these projects has been growing. Similar has been the case with projects that have been shelved. As we can see from the table below, post September 2007 the number of projects that have been shelved has shot up.
The reasons behind the slowdown in allocation of new projects and shelving of older ones can be attributed to the overall economic slowdown and fund raising issues. According to the Centre for Monitoring Indian Economy (CMIE), only a few projects were stalled due to other reasons like delay in government clearances, court cases or problems related to land acquisition.
Some positives to point out
If we consider the total number of outstanding investments, it wouldn't seem as if the country is going through a slowdown. Especially when compared to the previous year. The total number of outstanding investments at the end of December 2008 stood at Rs 80.7 trillion, higher by 41% YoY as compared to the total outstanding investments at the end of December 2007.
We believe the real impact of the economic slowdown globally and in India is likely to hit Indian infrastructure sector and related companies going forward. While we may see more projects going on hold rather than being shelved, as per our understanding in management interactions, it seems as if execution of these projects will be extended so that companies can curtail the impact of the slowdown.
More Views on News
Jul 25, 2017
Equitymaster HQ has been infiltrated. Valuable stock ideas have been leaked. Who's responsible?
May 27, 2017
What happens when minority shareholders are short-changed in the normal course of business?
Feb 15, 2017
PersonalFN believes SEBI has taken a step back-apparently in the admission of it going overboard with the regulations.
Aug 24, 2016
And here's your chance to claim a free copy of this book...
Aug 12, 2016
And Why India's demographic dividend could turn out to be a doubtful debt...
More Views on News
Aug 7, 2017
The data tells us quite a different story from the one the government is trying to project.
Aug 4, 2017
The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.
Aug 8, 2017
Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...
Aug 12, 2017
The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.
Aug 7, 2017
Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...
Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement. LEGAL DISCLAIMER:
Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here
. The performance data quoted represents past performance and does not guarantee future results.SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: firstname.lastname@example.org. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407