Coronavirus pandemic | Corporate finances to be hit as lockdown endangers debt worth Rs 15 trillion
The firms that are likely to be hit due to the nationwide 21-day lockdown include Tata Steel, Adani Power and Steel Authority of India Limited
March 30, 2020 / 01:01 PM IST
Nearly half of the borrowings by non-financial companies, totalling approximately Rs 15 trillion, is in danger due to the coronavirus pandemic-induced lockdown in India. This is likely to impact corporate finances adversely in the first quarter of the financial year.Business Standard
reports that the coffers of more than 200 non-financial listed companies will see drastic deterioration in the coming quarter of 2020-21 (FY21), which in turn would make it difficult for them to repay their debt.
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The firms that are likely to be adversely hit due to the nationwide 21-day lockdown to curb the spread of the deadly novel coronavirus include Tata Steel, Adani Power and Steel Authority of India Limited, among others. Most of these companies were already suffering from a high debt-to-equity ratio, high debt-to-Ebitda ratio, or low-interest coverage ratio negative. Some were even hit by negative net worth and amortisation in the first half of the FY 2019-20.
The 201-odd companies together owed a debt of Rs 14.9 trillion at the end of September 2019. This figure would rise to Rs 17.1 trillion if the figures for the 2018-19 financial year is also considered. Against this, all the 787 non-financial companies together owed Rs 24.2 trillion on September 30, 2019, and Rs 30.7 trillion on March 30, 2019.
However, the three-month interest moratorium granted by the Reserve Bank of India will allow the cash-strapped companies to stall interest payment of Rs 35,000 crore for the time being and provide them with the much-needed financial breather.
The World Economic Forum has already warned of a sharp decline in global economic activity, given nearly 40 percent of the world population — i.e., 3 billion people – are under lockdown due to the COVID-19 outbreak.