"It will take at least two or three quarters to reach the December 2019 GDP level of 4.7 percent. This crisis is going to impact all industries, with liquidity being one of the big challenges," Piramal said in the post earnings media call.
Ajay Piramal, Chairman of Piramal Enterprises sees availability of liquidity as one of the biggest challenges and expects normalisation of the economy to take at least two-to-three quarters due to the disruption caused by novel coronavirus, or COVID-19, pandemic.
"It will take at least two or three quarters to reach the December 2019 GDP level of 4.7 percent. This crisis is going to impact all industries, with liquidity being one of the big challenges. The Reserve Bank has taken initial steps to enhance liquidity. We expect many more steps," Piramal said in the post earnings conference call on May 11.
RBI has announced deferment of EMIs for three months as part of the COVID-19 relief measures. The scheme permitted banks not to deduct EMIs from borrowers due between March 1 and May 31. Borrowers from across categories including SMEs, retail borrowers and large corporations have availed this scheme.
Piramal said he can see the stress in the system. "Let's see what happens beyond May 31," he added.
Piramal Enterprises on May 11 posted a consolidated net loss of Rs 1,702.59 crore for the quarter ended March 31 due to higher provisioning on anticipation of bad loans. Revenue rose 3 percent YoY to Rs 3,581 crore.
"We have consciously shrunk our wholesale loan book by 12 percent and more importantly reduced our large single borrower exposure by Rs 4,200 crore over the past year. Given the uncertain macro environment, we have created Rs 1,903 crore of additional provision to mitigate potential contingencies in our financial services business," Piramal said.
He said the company has undertaken a stress test on around 335 projects which it financed. "We looked at each of the project and what is the likely stress scenario, what could be the loss and how we need to tackle it. So it's been a pretty complex exercise, and we're working on it."
Piramal expressed confidence about the company tiding over the crisis due to deleveraged balance sheet.
The company raised Rs 14,500 crore of additional capital through asset sales and fund raising. It raised Rs 13,500 crore in long-term borrowings over last one year and Rs 8,900 crore were available in the form of cash and undrawn bank lines as of March 31
Its debt-to-equity ratio stood at 2.6 times versus 3.9 times a year ago and the wholesale loan book declined 12 percent YoY.Piramal said the pharma business continues to be operational despite the COVID-19 led lockdown and has delivered a healthy revenue growth of 13 percent YoY to Rs 5,419 crore and an EBITDA margin of 26 percent for FY20.