Coronavirus pandemic: Services sector asks staff to work from home, manufacturing struggles to adapt 

Companies such as Flipkart, Paytm, Toyota Kirloskar Motor, Tata Consultancy Services, SpiceJet, HSBC India and Nestle have put in place protocols to lessen chances of employees catching the disease.
For representational purposes. (Photo | EPS)
For representational purposes. (Photo | EPS)

NEW DELHI: As the deadly coronavirus continues to spread in the country with the case count touching 78 in India on Thursday, companies - big or small - are voluntarily shutting down discretionary economic activity as part of the initial healing process. Notwithstanding the economic consequence, corporate, especially in the services sector are asking employees to work from home and restricting non-essential travel.

Grappling with supply constraints, the manufacturing sector, however, is still scrambling to take measures other than the vanilla safety and preventive measures as staying home is just impossible for their workers.

Companies such as Flipkart, Paytm, Toyota Kirloskar Motor, Tata Consultancy Services, SpiceJet, HSBC India and Nestle have put in place protocols to lessen chances of employees catching the disease.

Many have also warned investors of the threat that the virus, officially known as COVID-19, pose and anticipated a logical earnings hit in the quarters to come.

“Each geography has to determine whether they will encourage visitors or not,” said Hitendra Dave, head of global banking and markets at HSBC India. “Any travel that has to be undertaken now requires a higher level of approval… A lot of roadshows are now phone shows,” he said, adding travel advisories have been issued based on the level of infection.

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Among the worst hit is the travel, tourism and aviation sector. Suspension of visas have left many stranded in the throes of uncertainty with industry players pointing out that the move could have an immediate economic impact of at least Rs 8,500 crore, if not more. “The ban on travel to India for a period of one month will have a cascading economic impact on the  hotel, aviation and travel sector and is estimated to cause a direct loss of an estimated Rs 8,500 crore," said Rajesh Mudgill, secretary, Indian Association of Tour Operators.

Tech companies are also forced to adapt to remote work. So far, companies have cancelled at least 12 high-profile conferences causing an estimated economic loss of $1 billion - a number that is likely to continue its northward journey going further.

To name a few, IBM's Think, Facebook's F8, and Google I/O, which were all slated for May, have been called off.

Cellular Operators Association of India (COAI), which represents Reliance Jio, Bharti Airtel and Vodafone Idea, has also “cancelled a string of upcoming meetings in India of the 3 GPP (3rd Generation Partnership Project) on telecom standards, as international participants won't be able to come due to business travel restrictions,” said Rajan Mathews, director general of the lobby group.

COAI said it has lost about Rs 15 lakh in advances that won’t be refunded following the cancellation of the Mobile World Congress due to the epidemic.

To minimise mass gatherings, smartphone manufacturers such as Xiaomi are also sticking to online-only launch events. Fear of contracting the virus has already slowed down social activities like shopping or dining out, going to the movies.

One may not be surprised if the Indian Premier League (IPL) 2020 gets cancelled as no foreign player will be available for this year's T20 extravaganza till April 15 due to visa restrictions imposed by the government. This essentially would be a substantial loss given that the lack of advertisement revenues, which would have come otherwise. In 2019, the IPL saw over Rs 550 crore spent on advertising.

Furthermore, the government has placed restrictions on the export of dozens of drugs including paracetamol and various antibiotics fearing shortage of medicines. While companies have stockpiled ingredients, the impending shortages were pushing up prices. “If  coronavirus goes on much longer, there will definitely be an impact not only on Indian plants but on the global availability of commonly used drugs such as paracetamol,” said Dinesh Dua, chairman of the Pharmaceuticals Export Promotion Council of India.

The present stock-in-hand of the Active Pharmaceutical Ingredients (APIs) or the key raw material used for making medicines may be sufficient for 2 to 3 months to manufacture formulations.

Globally, the total number of cases have crossed 1,20,000 with the virus spreading to all continents except Antarctica. 

In India, infections have been relatively less but companies are grappling with supply constraints because of their heavy reliance on China. However, sectors such as automobile (circuit board), pharma (APIs or active pharma ingredients), electronics (appliances components), solar power parks, rubber (chemicals), steel (refractory, refractory compounds, steel mill rolls) dyes manufacturers and many more are looking at ways to reduce dependence on China.

Tata Steel, for instance, which is dependent on China for consumables such as steel mill rolls, electrodes and manganese as a metal, has already done a risk assessment in the first week of this month and is “pretty comfortable” till the end of April, said T V Narendran, CEO and Managing Director, Tata Steel.

The company has been sourcing some of its consumables from Turkey and Brazil and since “some shipments have started moving out so from our point of view there is no risk of operations getting affected,” he added.  

During an earnings call recently, Apple CEO Tim Cook also said the company is working on a mitigation plan to make up for any production loss in China, and is tapping alternative suppliers.

On a positive note, the crisis in China presents an opportunity for India as an alternative supply-chain market, particularly for electronics manufacturing and auto components sector, albeit in the long-run.

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