Clipped from: https://economictimes.indiatimes.com
Most companies are clueless about how the endemic disrupted their markets and businesses.
The real impact of Covid-19 on Indian businesses is still in the realm of conjecture. Forget business analysts, even most companies themselves are clueless about how the endemic disrupted their markets and businesses.
When Sebi this past fortnight asked India Inc to file assessments of Covid-19 impact on their businesses with the bourses, very few made rough estimates while others said they were finding it hard to ascertain it.
The Covid-induced lockdown in a way just shut down fully functional factories and took the hands off machines at manufacturing facilities across industries. But analysts say in effect the endemic caused far bigger damage than just halt business momentum, as it destroyed demand by triggering job losses and creating income uncertainty, induced behavioural changes in consumers and shifted market shares out of weaker hands.
This, they say, will impact top lines and affect profitability across the board, while bringing about permanent changes in many businesses.
Out of the 30 firms that filed their impact assessment reports with BSE, some said they had zero economic activity during the lockdown, while others said cost is going to rise due to labour shortage.
However, companies that produce and supply essential commodities faced limited impact, regulatory filings showed.
Based on these reports, here’s a bird’s eye view on how 10 players from across sectors and market-caps assessed business impact from the shutdown;-
Titan: The watch-to-jeweller major said the company’s operating cash flow was negative in the last two months due to virtually zero sales in the first six weeks of lockdown, increase in mark-to-market cash outflow on gold hedge due to rising gold prices and committed costs being incurred. However, these mark-to-market cash outflow is expected to be recovered when jewellery sale commences. Thus, the Covid-19 situation is expected to adversely affect profitability during the first half of this year.
Minda Industries: The company that makes switches and batteries for two and three-wheelers and off-road vehicles witnessed a significant drop in revenues, which in turn has adversely impacted profitability. “In order to mitigate some of the impact, the company has taken various initiatives to manage costs across the organisation and also initiated steps to conserve cash, which is critical in times of crisis. This will ensure that the company is able to appropriately address any challenge thrown up by the continuously evolving situation,” Minda IndustriesNSE -3.37 % said in a release.
TTK Healthcare: It said the Q1 performance is likely to have an impact on the annual performance for the year 2020-21. “There is sub-optimal performance from product lines which are categorised as essential supplies such as pharmaceuticals. Negligible sales of other categories such as cosmetics are likely to impact the performance in Q1,” it said.
Hotel Leelaventure: The company said the immediate future looks challenging and the lockdown will have a significant impact on its revenues and profitability. “The company will clock almost zero revenue in June quarter and the same will continue in the second and third quarters of the financial year,” Hotel Leelaventure said in a filing on May 26.
Cochin Shipyard: The company said there were no production activities from March 23 to May 5. To catch up with the lost production days, the second and fourth Saturdays — which were closed holidays earlier — have now been declared as normal working days until further notice. “A delay in running projects, will have an adverse impact on financial performance and profitability during FY20-21 but the assessment of the impact will be possible only after stabilisation of operations in the yard,” it said.
Nagarjuna Agritech: The company said its liquidity position is not adequate and it has been difficult at this stage to assess revenue and profitability for the whole year of FY21. “Due to lockdown extending in many states and also restriction imposed, the supply chain has been severely affected. While there is an easing of restriction for non-essential goods, freight and labour cost remain high making it unviable,” the company said.
Steelcast: The smallcap metal player believes that there is a temporary reduction in demand due to varying lockdown across the world, which they expect to improve in the third and fourth quarter. “The profitability during Q4 of FY20 and Q1 of FY21 is likely to be adversely impacted,” it said.
KEI Industries: The cables manufacturer on May 30 said that they are operating at around 50 per cent production capacity. “We are now operating in shifts at our plants located at Bhiwadi,” it said. KEI believes that profitability is likely to improve from Q2 onwards.
Dhanuka Agritech: The agrochemical formulation firm said that there is no material impact of Covid-19 on the profitability, demand and liquidity. However, it said there may be some impact on assets if real estate prices may come down.
Shree Steel Wires: The smallcap company, which is engaged in the manufacturing of wire rope allied and railway overhead equipment products, has not earned a single penny since the beginning of the lockdown. “The business is adversely affected due to lockdown and the exact impact of Covid-19 as of now is hard to ascertain. There is no revenue till date for the company,” it said while adding that unfortunately payment receivable from government departments has got delayed with no communication.