About 547 projects got assistance from banks and FIs during 2022-23 with a record high total project cost of Rs2.66 trillion, compared to 401 projects having a total project cost of Rs1.41 trillion during 2021-22, according to an article published by the RBI, which is an analysis of the projects sanctioned by banks/FIs.
An article titled ‘Private Corporate Investment: Performance and Near-term Outlook’ written by Shreya Bhan, Rajendra N Chavhan and Rajesh B Kavediya, Department of Statistics and Information Management, projects that the envisaged total cost of the projects financed by banks/financial institutions reached a new peak during 2022-23 since 2014-15. Of the total capital investment during 2022-23, about 40% is expected to be spent in 2023-24.
Characteristics of Projects
A sustained pick-up in bank credit in recent period, rising capacity utilization, improved business outlook and demand conditions and various government policy initiatives to support investment activities provided a conducive environment for the private corporates to undertake fresh capital all India investment.
Cleaning up of balance sheets by both corporates and banks provides scope to increase lending activities. The investment outlook of private corporates, as reflected in terms of the total number of projects as well as the total project cost, which got sanctioned by banks/FIs, continued to show improvement during 2022-23. During 2022-23, 393 companies, which did not avail of any financing from banks/FIs for capex projects, raised Rs824.48 billion through ECBs, while 42 other companies raised Rs36.29 bn through domestic equity issues under the IPO route for funding their capex needs.
Overall, investment plans of 982 projects were made during 2022-23, with record capital outlay of Rs3.52 tn – higher than the level seen since 2014-15, as against 791 projects in 2021-22 with investment intentions of Rs1.96 tn.
Mega, Large Projects Up
The size-wise distribution of projects showed a noticeable increase in the number of projects across various sizes. There were eight mega projects (with project cost Rs50 bn & above) and 68 large projects (Rs10 bn- Rs50 bn), sanctioned by banks/ FIs during 2022-23, having share of 27.1% and 41.3% of total project costs, respectively. The phasing plan of mega/large projects may have a bearing on the capex in the longer-term. Purpose-wise pattern of projects indicates that investment in green field (new) projects accounted for the largest share of 93.1% in the total cost of projects financed by banks/FIs during 2022-23, in line with the trend seen in the past. A marginal share of 6.1% of total project cost was directed towards expansion and modernization. The infrastructure sector, comprising power, telecom, ports & airports, storage & water management, special economic zone (SEZ), industrial, biotech & IT park, and roads & bridges, remained the major sector accounting for 60% share in the total cost of projects during 2022-23.
Top 5 Garner 57%
The state-wise distribution revealed that the top 5 states viz., Uttar Pradesh, Gujarat, Odisha, Maharashtra and Karnataka, together account for 57.2% share in total project cost during 2022-23, higher than 43.2% share during 2021-22. In 2022-23, Uttar Pradesh accounted for the highest share (16.2%) in the total cost of projects sanctioned by banks/FIs, followed by Gujarat, Odisha, Maharashtra and Karnataka. The share of Uttar Pradesh and Odisha in the total cost of projects improved significantly from the previous year as well as the average share recorded during the period 2013-14 to 2020-21.
Phasing Profile of Investment
Phasing profile of capital expenditure of projects sanctioned by banks/FIs during the current year and the previous years, provides near-term (one year ahead) investment outlook of private corporates. The phasing from the cohort of projects in 2022-23 indicates that about 33% (Rs879.97 bn) of the total proposed capital expenditure was expected to be spent in the same year, while 34.7% (Rs925.39 bn) is likely to be spent in 2023-24 and another 24.8% (Rs660.71 bn) in the subsequent period. Of the total cost of projects sanctioned in 2022-23, 7.5% of the amount was already spent prior to 2022-23. From the planned capital expenditure based on the projects sanctioned by banks/FIs till 2022-23, the capex envisaged in 2022-23 recorded an increase of 9.8% to Rs158 trillion during 2022-23 over the previous year.
The envisaged capital investments of private corporates, based on the projects sanctioned by banks/FIs, increased for the second consecutive year after remaining subdued during 2019-20 and 2020-21. The total cost of projects sanctioned by banks/FIs during 2022-23 increased to a record high of Rs266 tn. Of the total cost of projects, around 35% is likely to be spent during 2023-24 and about 25% in the subsequent period.
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