India Inc had started showing signs of slackening demand even before the outbreak of the Covid-19 pandemic, and the financial results for Q4 FY2019-20 tell that tale.
According to SBI’s Ecowrap report, a majority of companies across sectors have suffered a revenue de-growth of 5 per cent for the quarter, accompanied by an around 30 per cent dip in operating profits.
“Overall, we feel no sector is untouched with the impact of Covid-19 and subsequent lockdowns even after opening up will prolong the economic pain,” the Ecowrap report said. “Results in Q4FY20 (in listed space ex BFSI and refineries) reveal a de-growth of 5 per cent in revenue and around 30 per cent both in operating profit as well as bottom line,” it added.
The worst impacted sectors were automobiles including auto ancillaries, textile, steel, non-ferrous metal, real estate, construction and capital goods.
All of which reported double-digit negative growth across parameters.The report notes that while sectors with a strong balance sheet will come out of this crisis, companies with weak balance sheets will find it difficult to survive.
“Subsequently, we observe that sectors such as automobile, FMCG, and consumer durables, though they have reported negative growth in all key parameters in Q4FY20, they also have the requisite balance sheet strength to come out of the current situation,” SBI analysts wrote.
However, the report added that sectors such as sugar, steel, telecom services, construction and realty do not have sufficient balance sheet strength and may face difficulties in this uncertain period. That is the reason why many companies have faced ratings downgrades, it pointed out.
“We had 182 rating upgrades and 2,996 rating downgrades for the select sectors during Q1FY21,” the report said. It also observes that banks may face trouble too.
“We have also observed that out of the total 3,774 admitted cases in NCLT, 1,527 cases are from manufacturing sector. With the IBC now suspended for a year, this will post significant challenges for banks, “ the report said.