QBiz: COVID-19 Puts 15 Tn Debt At Risk; Big Firms Defer Appraisal

1. Lockdown Puts Rs 15-Trillion Debt at Risk, to Impact Finances

More than half of all borrowings, worth nearly Rs 15 trillion, by listed non-financial companies are in the danger zone due to the coronavirus (COVID-19) lockdown and its adverse impact on corporate finances in the coming quarters.

According to an analysis by Business Standard, 201 non-financial listed companies are likely to face a sharp deterioration in their financial position in the first half of 2020-21 (FY21), making it tough for them to service their debt.

Some of the top indebted companies likely to face financial headwinds in the coming quarters include NTPC, PowerGrid, Tata Steel, Adani Power, JSW Steel, UPL, and Steel Authority of India.

(Source: Business Standard)

2. Big-4 Firms Defer Promotions, Appraisals Amid COVID-19 Crisis

Leading consultancy and audit firms have taken definitive steps relating to human capital even as India Inc tries to gauge the impact of the COVID-19-related slowdown and works to save jobs.

PwC India, Deloitte India, Ernst and Young or EY India have all decided to defer their employee appraisal cycles, which includes deferring promotions and bonuses, because of the virus outbreak, said officials working with these firms.

(Source: Mint)

3. Mega Merger of State-Run Banks Comes Into Force From 1 April, Says RBI

The schemes for the merger of ten state-run banks into four lenders are coming into force from 1 April, according to the Reserve Bank of India. The banking regulator in separate releases announced that the branches of merging banks will operate as of the banks in which these have been amalgamated.

The government on 4 March had notified the amalgamation schemes for 10 state-owned banks into four as part of its consolidation plan to create bigger size stronger banks in the public sector.

Bank officers' unions, however, earlier this week wrote to the prime minister seeking to defer the merger schemes of lenders due to the lockdown triggered by coronavirus outbreak. Finance Minister Nirmala Sitharaman on Thursday had clarified that the mega bank consolidation plan was very much on track and would take effect from 1 April despite the onslaught of coronavirus pandemic throwing the country out of gear.

As per the scheme, Oriental Bank of Commerce and United Bank of India will be merged into Punjab National Bank; Syndicate Bank into Canara Bank; Allahabad Bank into Indian Bank; and Andhra and Corporation banks into Union Bank of India.

(Source: NDTV)

4. India’s Gig Economy Goes off the Rails as the COVID-19 Crisis Deepens

The turmoil caused by the outbreak of COVID-19 is expected to derail India’s gig economy, which was projected to achieve a market size of $455 billion by 2023 by industry group Assocham.

Led by online food delivery firms Zomato and Swiggy, ride-hailing companies Uber and Ola, online homestay brand Airbnb, hospitality chain Oyo and a host of other shared economy companies, the sector is bracing itself for unforeseen challenges as lives are unlikely to return to normal even after the completion of the 21-day lockdown, which could also be extended.

In the short term, the companies are likely to suffer from weak consumer demand, supply-chain disruptions and shortage of manpower, leading to poor growth rates.

(Source: Mint)

5. Industry Calls for Extended Financial Year Due to Coronavirus Pandemic

Auditors and industry bodies have called for extending the financial year 2019-20 by three months, till the end of June, amid the coronavirus (COVID-19) pandemic.

Industry representatives recently met officials of the Ministry of Corporate Affairs, seeking among other things, an extension of the financial year on grounds that “any financial statement prepared for April 2019 to March 2020, will not give a true and fair view as it does not represent one complete business cycle of the entity”.

The Confederation of Indian Industry (CII) told the ministry: “With the current backdrop of coronavirus, the entire economy is getting stagnated for at least a couple of quarters, which are a kind of missing quarters for corporates.”

(Source: Mint)

6. Power Generators Shut Capacity as COVID-19 Hits Demand, Upends Normal Life

With normal life thrown out of gear with a nationwide lockdown, the power sector is witnessing an unprecedented amount of generation capacity being shut.

In a month, the demand for power has gone down by 31 percent. And, there has been a 68 percent increase in capacity which has been backed down.

According to data from regional load despatch centres, of 117,000 Mw generation capacity, 41,037 Mw was shut on Friday due to “low demand/reserve shutdown”. With the high-paying commercial consumers shut for another 21 days, states are avoiding power purchase. Some states are shutting down their costlier units and shifting to cheaper sources. Uttar Pradesh has already said it will be unable to pay to power and coal companies and the railways.

(Source: Business Standard)

7. Enough Stock of Petrol, Diesel, LPG Available to Last Lockdown, Says Indian Oil

India, the world's third largest energy consumer, has enough petrol, diesel and cooking gas (LPG) in stocks to last way beyond the three-week nationwide lockdown as all plants and supply locations are fully operational, Indian Oil Corp (IOC) Chairman Sanjiv Singh said. Singh, who continued to oversee the mammoth operations of ensuring that fuel reaches every nook and corner despite bereavement of his father on the day 21-day lockdown was declared, said there is no shortage of any fuel in the country and customers should not resort to panic booking of LPG refills.

(Source: NDTV)

8. Banks Face Operational Hurdles in Implementing 90-Day Loan Moratorium

The 90-day moratorium on all term loans given to customers is a big relief for banks as well as borrowers, but the initial feedback from the industry is that the documentation process may entail some hardships.

Bankers anticipate operational challenges with respect to communicating the Reserve Bank of India's (RBI’s) dispensation to customers, documenting their consent to exercise the option and the requisite paperwork that comes along with it.

(Source: Business Standard)

9. Mutual Funds’ Steady SIP Flows Face Their Biggest Ever Test Yet

With the surge in inflows into mutual funds in recent years, the role of mutual funds in the markets has increased considerably. Between 24 February and 23 March this year, while FPIs sold equities worth ₹65,371 crore ($8.73 billion), purchases by mutual funds stood at ₹32,448 crore ($4.33 billion), accounting for more than half of total purchases worth $8.18 billion by all domestic institutions.

A moot question is if the optimism will continue. Fund managers and investment advisers say that the ideal thing for investors to do is to stay with the systematic investment plans (SIPs), especially now that they are getting to buy stocks at much lower prices. “The whole premise of rupee cost averaging would come undone if investors were to stall or halt their SIPs when valuations are cheaper. SIPs invest through the entire valuation cycle, buying more units when valuations are cheaper and less when valuations are rich," said Vetri Subramaniam, group president and head of equity at UTI Asset Management Co Ltd.

(Source: Mint)

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