India Inc recovery likely to be prolonged due to Corona

New Delhi: The coronavirus pandemic will significantly impact performance of companies and it is likely to be severe and prolonged for select sectors, especially aviation, hospitality and retail, according to ratings agency Icra.

The pandemic, followed by extended lockdowns in India both nationally and then localised, has impacted India Inc for the major part of the first quarter of the current financial year.

Although economic activity has started to recover from the troughs experienced in April 2020, when the lockdown was at its severest, the unabated rise in Covid-19 cases in the unlock phase and localised re-imposition of lockdowns in several states have interrupted this recovery in recent weeks, Icra said in a statement.

"The financial performance of corporate sector would be significantly impacted, as manufacturing, construction, industrial and consumption activities have taken a sharp hit. As per Icra analysis, the impact is likely to be severe and prolonged for select sectors, especially aviation, hospitality, retail and allied businesses," it said.

Icra vice-president Shamsher Dewan said, "Overall, Q1 FY2021 will be a washout for India Inc, with significant pressure on revenues and earnings, considering that the major part of the quarter was under lockdown or gradual ramp-up phase."

With continuing fixed overheads and virtually no revenues, the earnings and margin profile of the corporate India are expected to have deteriorated quite sharply during the quarter, despite some recovery towards the end, he added.

"Furthermore, with gradual recovery expectations during the rest of the fiscal, and the current subdued macro-economic environment, pressure on earnings and credit profiles are expected to continue over FY21," Dewan said.