Comments
Sounding a note of caution over the long-lasting impact of the pandemic-induced lockdown on India Inc, rating agency ICRA said it has taken 491 negative rating actions between March 1 and June 30 this year.
“ICRA also has taken rating actions to reflect the severity of the crisis, with 491 negative rating actions taken between March 1 and June 30. The sectors directly impacted by the pandemic have faced the brunt of rating actions,” it said in a statement on Monday, adding that since the situation is fluid, it would continue to monitor its portfolio closely as the situation evolves.
Financial performance
India Inc is on a long road to recovery and its financial performance would be significantly impacted as manufacturing, construction, industrial and consumption activities have taken a sharp hit, the agency said. Its analysis revealed that the impact is likely to be severe and prolonged for select sectors, especially aviation, hospitality, retail and allied businesses.
“The sectors directly impacted by the pandemic have faced the brunt of rating actions. Accordingly, negative rating movements have been more in sectors that were at high and medium risk from the impact of the pandemic,” it said.
“Overall, the first quarter of FY21 will be a washout for India Inc, with significant pressure on revenues and earnings, considering that the major part of the quarter was under lockdown or gradual ramp-up phase. With continuing fixed overheads and virtually no revenues, the earnings and margin profile of Corporate India is expected to have deteriorated quite sharply during the quarter, despite some recovery towards the end,” said Shamsher Dewan, Vice-President, ICRA.
He also pointed out that with expectations of a gradual recovery during the rest of the fiscal and the current subdued macro-economic environment, pressure on earnings and credit profiles are expected to continue over the fiscal year.
While economic activity has started to recover and many sectors are also adapting to the new normal, the rapid spread of Covid-19 infections in the unlock phase and localised re-imposition of lockdowns in several Stateshave interrupted recovery in recent weeks, the agency noted.
Uneven recovery
While the first quarter was impacted by the lockdown, according to ICRA’s analysis of high frequency data points available till July 2020, the trend indicates some encouraging cues of a gradual, yet uneven recovery across different sectors.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.