More than half of all loans from listed nonfinancial corporations worth nearly 15 trillion rupees are in the danger zone due to coronavirus blockage (Covid-19) and its negative impact on finances companies in the coming quarters.
According to a Business Standard analysis, 201 listed non-financial companies are expected to face a sharp deterioration in their financial situation during the first half of 2020-2021 (FY21), which makes it difficult for them to service their debt.
Some of the major indebted companies likely to face headwinds in the coming quarters include NTPC, PowerGrid, Tata Steel, Adani Power, JSW Steel, UPL and Steel Authority of India (SAIL), among others.
The financially stretched companies in our sample either had negative net worth or earnings before interest, taxes, depreciation and amortization (Ebitda) in the first half of 2019-2020 (FY20) or had a high debt ratio, high debt ratio / Ebitda or low interest coverage rate.
Together, these companies owed their lenders 14.9 trillion rupees at the end of September 30, 2019, up 4.1% year-over-year in the first half of the year. 2010. The figure rises to Rs 17.1 trillion if their audited balance sheet for 2018-19 (FY19) is taken into account. The combined borrowings of these companies increased 12% year-over-year in fiscal 2019.
In comparison, the entire sample of 787 companies had combined borrowings worth 24.2 trillion rupees at the end of September 2019 and 30.7 trillion rupees at the end of March 2019. L analysis is based on a common sample of 880 companies included in the ESB500, BSE MidCap or BSE SmallCap Index.
The latest Reserve Bank of India (RBI) waiver authorizing a three-month moratorium on interest payments by borrowers will allow these companies to delay payment of Rs 35,000 crore in the next three months. . Together, these companies had spent about 1.1 trillion rupees on interest payments in the first nine months (April-December 2019) of fiscal 2010. The interest moratorium will allow these companies to breathe financial probable decline in revenues and profits due to the closure of Covid-19.
The interest payment represented on average 9% of the net turnover of these companies during the first nine months of the financial year 2010 and constituted their main cost after the raw materials and before the wage costs. In comparison, interest payments were equivalent to 3.5% of net sales of all non-financial companies listed in the Business Standard sample.
In addition, listed non-bank finance companies such as Housing Development Finance Corporation, Bajaj Finance, Shriram Transport Finance, LIC Housing, Indiabulls Housing, Piramal Enterprises and L&T Finance Holdings had total borrowings worth $ 24.3 trillion. rupees at the end of September 2019.
Rating agencies have already warned of a spike in rating actions as foreclosure drains sectors’ sources of income. At the start of the week, CRISIL examined 120 companies most affected by the situation, belonging to sectors such as airlines, hotels, tourism, shopping centers, organized retail, multiplexes and restaurants. The review resulted in a rating action on 81 companies, while the ratings on the other 39 were retained.
According to data from the India Energy Exchange, demand for electricity from industries and distribution services is down 40% after the foreclosure. As a result, prices on the electricity exchanges are down 30% to around 2 rupees per unit against an average of around 3 rupees in February 2020. This is likely to negatively affect the results of the companies of electricity in the first quarter of fiscal 21..
Metals and mining companies face the challenge of a sharp drop in metal and ore prices due to a drop in global demand after the closure of Covid-19. According to a World Economic Forum report, nearly 3 billion people around the world, or around 40% of the world’s population, are in some form of blockage, causing a sharp drop in global economic activity.