One month's lockdown can erode 8-10% of construction firms' 4th quarter revenue: Report

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A nationwide lockdown to contain the COVID-19 pandemic will adversely impact construction companies and a month's lockdown can erode 8-10 per cent of their fourth quarter revenue, a report says.

According to ratings agency India Ratings, fourth quarter of every fiscal typically accounts for 30-35 per cent of the annual revenue of construction companies, of which a month's lockdown can erode 8-10 per cent.

The agency believes that construction activities across cities like Mumbai Metropolitan Region, Delhi, Pune, and Bengaluru are likely to be stalled or progress at a significantly slower-than-anticipated pace for a major portion of March 2020 which may continue in April as well.

Companies with ongoing significant construction works in such cities are the ones likely to be the most affected, as they are turning out to be the epicentre of the outbreak, the agency said.

In addition, "continued expenditure in the form of overheads and finance charges is also likely to affect the profitability of construction companies, owing to a lower base for absorption of these overheads," the agency added.

"Many large and established construction companies are facing corporate insolvency resolution process. The corona-crisis will seriously impact the revenues of the construction companies and almost all of them will face huge financial losses in the months to come," an authorised representative of Shapoorji Pallonji Group told PTI.

He further noted that all site activities in Mumbai and the rest of Maharashtra have come to a grinding halt as material supplies have stopped, and key subcontractors were unable to arrange resources for the construction activities.

According to property consultant Anarock there are around 15.62 lakh residential units which are under construction across the country.

"Of these, nearly 57 per cent or around 8.90 lakh units are in Mumbai Metropolitan Region and National Capital Region alone. With construction activity almost coming to a standstill, homebuyers will have to brace themselves for another wave of delayed project deliveries," Anarock Property Consultants Head - Research, Prashant Thakur said.

L&T Senior Vice President – Corporate HR Yogi Sriram said the company has decided to cease operations at all its establishments in Mumbai, except for excluded establishments providing essential services as per the order of the Municipal Commissioner.

"This is in force with immediate effect and will be reviewed on March 31," he added.