70% LISTED FIRMS MAY DIP INTO RESERVES FOR APRIL PAY

About 70 per cent of the listed companies are now facing the prospect of little or no revenues in April, as the coronavirus-induced lockdown enters the second month. This has made it tough for many of them to service their fixed costs such as salary and wages and interest on their loan. These 1,565 companies in the non-essential category had nearly 3 million full-time employees on their rolls at the end of March 2019. KRISHNA KANT & DEV CHATTERJEE write

With the Covid-19 lockdown in India in its second month, nearly 70 per cent of the listed companies are facing the prospects of little or no revenues in April.

This will make it difficult for many of them to service their fixed costs, such as salary and wages, as well as interest on their loan. In these 1,565 companies, which are in the non-essential category, there were nearly 3 million full-time employees on their rolls at the end of March 2019 with a monthly salary bill of around ~31,000 crore during the first nine months of FY20. Also, these companies had monthly interest payments of around ~33,000 crore.

These expenses are based on their profit and loss accounts for the first nine months of FY20. Together, these 1,565 companies spent ~2.82 trillion on salary and wages during the April-december 2019 period and another ~2.96 trillion on interest on their borrowings.

In all, 2,205 companies reported their profit and loss for the first nine months of FY20 out of which only 637 companies (around 30 per cent of the sample) operate in essential categories. These include food processing, banks, insurance, telecom, media, power, oil & gas, pharmaceuticals, chemicals, mining and information technology (IT) services, among others.

The lockdown and drying up of revenues have created financial problems for corporate and business leaders as they have to scramble to raise resources to pay to their employees and creditors.

For example, Maruti Suzuki reported zero sales during April. It’s the same story for industry peers such as Hyundai India, Tata Motors, Mahindra & Mahindra, Bajaj Auto and Hero Motocorp, among others. Consumer durable companies, such as Havells India, Bajaj Electricals, TTK Prestige and Voltas, face the same situation.

The chief executive officer (CEO) of a large corporate said the company managed to give salary for April by dipping into its cash reserves. But this cannot go on for long. "Without cash flows and revenues, it will not be possible to keep on giving salaries. Sooner or later, we will have to stop this," he said.

“If the Reserve Bank of India (RBI) and the Centre do not act now, Covid-19 in different forms (no jobs, no income and no demand) will kill industry and people asso

ciated with it. India will be on sale. The situation is serious,” he said, asking not to be named. Industry leaders are demanding cheap liquidity to tide over the current situation and fiscal stimulus to revive consumer demand..

The largest numbers of jobs are in the textiles and garments sector with listed companies having nearly half-a-million fulltime employees at the end of March 2019. These companies had a combined monthly salary bill of around ~1,700 crore during the first nine months of FY20. They are followed by non-banking lenders, which had total employee base of around 400,000

people at the end of March 2019. They reported a monthly salary and wage bill of around ~3,300 crore in the same period. Auto makers and their component suppliers, however, top the charts in terms of the overall salary bill. On an average, the auto industry spent nearly ~8,000 crore a month on employees during FY20. The industry is followed by metal producers such as Tata Steel, Hindalco and Vedanta with a monthly salary bill of around ~4,500 crore.

Analysts, however, say that the actual number of employees affected by the lockdown could be much higher than what was reported by companies.