After the regulatory rap by Securities and Exchange Board of India (Sebi) over a dozen companies have disclosed the financial impact of covid-19. Majority of the listed companies so far had just been disclosing lockdown and related shut down of operations but financial assessment was missing. Companies such as D-Mart, Trent, Cochin Shipyard, Titan, Leela Hotels have disclosed the challenging times ahead due to the pandemic.
The disclosures by companies give a sense of the pain points for India Inc which is spanning across plethora of issues. No revenues, no sales, no bookings, lack of migrant work force, suboptimal performance of essential services will continue to impact balance sheets for atleast two quarters.
While the financial conditions look bleak majority of companies have reported that they have enough liquidity buffer and will be able to service outstanding loans.
With these set of companies disclosing the financial impact of covid-19 on revenue and profitability we may see more disclosures in days to come. So far the companies were hesitant to disclose the financial impact citing lack of certainty when the effects of covid-19 and related slowdown will ebb.
"In normal course company management must communicate all important business concerns in a transparent manner to all its stakeholders enabling stakeholders to evaluate risks rewards and be generally aware. Same thing holds true for COVID impact. Unfortunately, many companies do not believe in this philosophy as a result Sebi as a regulator is forced to micromanage and issue instructions. Step taken by sebi is appreciated as stakeholders would be able to understand impact of crisis and take informed decision," said JN Gupta, co-founder and MD of stakeholder empowerment services, a proxy advisory firm.
Sebi on 20 May had directed companies to tell investors the impact of covid-19 on their businesses. Listed entities should endeavour to ensure that all investors have access to timely, adequate and updated information, Sebi had said.
The Leela or HLV Ltd belonging to hospitality sector, a sector worst hit due to the pandemic acknowledged that three months of FY 21 will register zero revenues and the impact would extend to second and third quarter of FY21.
“As of now, there are barely any bookings being made for the future and the current ones all stand cancelled. There is limited scope for quick revival. It is expected that its recovery will be slow and it will largely depend on factors such as easing of air travel, rail and road operations and recovery of the economy," Leela said in an exchange disclosure .
Dmart or Avenue Supermarts Ltd which continued operations due to falling in category of essentials saw a drop in revenue by 45%.
“During the month of March 2020 it (revenue) grew by just 11% over March 2019 due to the lockdown effect of the last 9 days of March this year. The trend rapidly deteriorated in April during which more than half of our stores remained closed for operations or operated for extremely restricted hours," said Dmart.
For Titan the loss in the jewellery business was majorly due to loss of Akshay Tritiya sales and complete loss of sales in the April and May months which is typically the wedding season. It registered only few online sales.
“The wedding season is also normally quite strong in the months of April and May and this year almost all weddings in this period have been postponed. In last 2 (April and May) months, the Company’s operating cash flow was negative due to virtually zero sales during the first 6 weeks of lockdown, increase in mark-to-market cash outflow on gold hedge due to rising gold prices and committed costs being incurred," said Titan.
TTK Healthcare Ltd in its disclosure said that foods business performed better of the lot with 50% of normal average sales during April 2020 and this would be better in May 2020, pharmaceutical piece registered 40-50% of average sales. Sub-optimal performance from product lines which are categorized as essential supplies such as Pharmaceuticals, Woodward's Gripewater, etc., and also only negligible sales of other categories like cosmetics, medical devices, etc., the performance for the Q1 of FY 2020-21 is likely to be impacted, the company said.
Cochin Shipyard in a 20-page presentation said Delay in running projects, will have an adverse impact on financial performance and profitability of the company during FY20-21 but the assessment of the impact will be possible only after stabilisation of operations in the yard.
A real estate company Kolte Patil Developers Ltd said that it expects the company to reach optimum construction levels in 3 to 6-month post lifting of lockdown as migrant labourers resume work gradually. So far it has mobilized nearly 40% if its construction workforce at its sites in Pune and Bangalore.