Tuesday, June 14, 2016

Stalled projects graph of the day

Indian Express points to the lack of promoter interest and unfavorable market conditions as accounting for more than half the projects which were reported as stalled in 2015-16 according to CMIE. This was 19% last year and in single digits the previous year. 

Interestingly, since 2012-13, even as the share of projects stalled due to government related issues (clearances, raw material supply, land acquisition etc) have declined precipitously, those due to promoter's problems have risen. I am inclined to the view that this is a case of the deliberately suppressed real problems surfacing.  
In this context, I had blogged some time back arguing that a vast majority of stalled projects were ab-initio either fully unviable or had to be restructured significantly to regain commercial viability. The high proportion of projects which were shown as ostensibly stalled due to land acquisition and clearances would most probably not have gone ahead in any case for commercial considerations. Blaming site acquisition and clearances gave the promoters an excuse to absolve themselves and kick the can down the road in the expectation that something would happen to salvage the project. 

This also means that the bad loans and strained balance sheets faced by the country's banks and corporates respectively are not going to disappear anytime soon. Painful restructuring may be necessary with the majority of these projects, with both banks and promoters taking hits.

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