Maharashtra's Capex and Infrastructure Growth: Insights from Experts
Mahesh Vyas, MD & CEO of CMIE, Anil Yadav, Director of Investor Relations at IRB Infrastructure, and Rajashree Murkute, Senior Director at CareEdge Ratings, discuss the robust infrastructure and capex growth in Maharashtra despite political challenges.
MaharashtraCapexInfrastructureEconomic GrowthInvestmentsReal Estate MaharashtraNov 27, 2024
Anil Yadav, Director of Investor Relations at IRB Infrastructure, stated that while central government activity has slowed, Maharashtra has shown strong ordering activity. He highlighted that a significant portion of road infrastructure capex in the last 3-5 years has been driven by government spending through the Hybrid Annuity Model (HAM) and Engineering, Procurement, and Construction (EPC) projects.
Rajashree Murkute, Senior Director at CareEdge Ratings, emphasized the importance of capex trends for economic growth. She pointed out that Maharashtra led in project completions during the first half of FY25, with its share of announced projects rising to 35%.
When asked about Maharashtra's performance, Vyas stated, 'Maharashtra has always been one of the better performers on the capex front. It has a lot of investments in manufacturing, and it competes with states like Tamil Nadu, but Maharashtra has been on top, and it has not lost that position much. There is competition from Gujarat and Tamil Nadu, but Maharashtra has done well. It continues to do well. It is the top state in terms of attracting investments despite the political upheavals and ups and downs.'
However, there was a slight fall in project completions in FY23, from 21.69% to 13.69%, as per CMIE data. Vyas believes this is not a significant concern, stating, 'That is not a big deal. You will see a lot of investments coming through in the first half of FY24-25. Maharashtra did very well in FY21-22. It did come down a bit. One cannot expect the graph to keep on rising continuously in these projects because many of them are very clunky projects, they are big projects. So, one should not read too much into the fall in FY23-24. I see a little pickup in FY24-25.'
Yadav added that the capex on the road sector in the last three to five years was largely funded by the government through EPC or HAM projects. He also mentioned that traffic growth has been muted in the last six to eight months, but with a stable government and a clear mandate in Maharashtra, traffic growth is expected to improve in the coming quarters.
Murkute elaborated on Maharashtra's capex trends, stating, 'Capex trends have been a very important indicator for economic development. Early this month, when we published a report on capex, we noticed that Maharashtra continues to lead in terms of project announcements and completions. In the first half of FY25, the number of projects announced in Maharashtra increased to about 35% of the overall investment projects announced amongst all the 20 major states, compared to about 20% in FY24.'
She also highlighted that in terms of project completions, Maharashtra continues to lead, with about 19% of the overall 20 major states that they have been tracking, compared to 14% in FY24. Murkute concluded, 'All in all, what we observe for Maharashtra is not just the manufacturing sector. Infrastructure has been a central focus for the state, and the recent big marque projects should bolster additional activity in the state for some more time.'
Vyas provided an overall assessment of the capex cycle, stating, 'We aren’t doing very well. We began this fiscal year with the elections, and therefore the new investment proposal slowed down, and so did completions. Since a lot of the capex movement in the recent past has been government-driven, one could understand that elections and restrictions around that period lead to a slowdown. But what is disappointing is that the September quarter also turned out to be bad. It is quite low in terms of new investment proposals and completions. The quarter was better than the June quarter, but still, it was quite low compared to all other quarters since the pandemic. The new investment proposals are very low, and completions are largely delayed.'
Murkute concurred, adding, 'In terms of the capex cycle, both central and state capex have faltered from the previous achievements. For H1, we have observed that there is a contraction in the centre as well as state capex by about 15 to 10.5% on a YoY basis. So, we hope this now will rest, but yes, we are still short in terms of our achievement on capex cycles.'
Frequently Asked Questions
How has Maharashtra performed in terms of capex compared to other states?
Maharashtra has consistently been one of the top performers in terms of capex, maintaining its lead over other states like Tamil Nadu and Gujarat. Despite political challenges, it continues to attract significant investments, especially in the manufacturing sector.
What has driven the road infrastructure capex in Maharashtra over the last 3-5 years?
A significant portion of road infrastructure capex in Maharashtra has been driven by government spending through the Hybrid Annuity Model (HAM) and Engineering, Procurement, and Construction (EPC) projects.
Has there been a decline in project completions in Maharashtra recently?
Yes, there was a slight fall in project completions in FY23, from 21.69% to 13.69%, as per CMIE data. However, experts expect a pickup in completions in the first half of FY24-25 due to ongoing investments in big projects.
What is the outlook for traffic growth in Maharashtra after the elections?
With a stable government and a clear mandate in Maharashtra, traffic growth is expected to improve in the coming quarters.
What is the overall assessment of the capex cycle in India, and how does it compare to the pre-COVID period?
The capex cycle in India is not as robust as it was in the pre-COVID period. There has been a contraction in both central and state capex by about 15 to 10.5% on a year-over-year basis, largely due to the impact of elections and restrictions.
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