MUMBAI: The impact of COVID-19, more commonly referred to as coronavirus, will play out differently on corporates, India Ratings and Research has said.
For instance, factors like availability of key raw materials could be a constrain pharmaceutical and auto ancillaries companies if the outbreak continues to escalate, but input prices, primarily of crude, may soften, marginally benefiting EBITDA margins of companies, the agency said in a report.
India Ratings analysed December quarter results of 412 listed domestic companies across 14 key debt-heavy sectors.
“The top line pressure remains imminent across corporates. In Q3 FY20, the aggregate revenue of all the companies in our sample declined 5% yoy. Major sectors which contributed to the decline were metals (10%), capital goods (9%) and auto original equipment manufacturers (OEMs; 8%) as well as ancillaries (6%),” the report said.
“Auto OEMs recovered marginally from 2QFY20 (negative 13%) due to festival sales. Companies with a large commercial vehicle portfolio underperformed as against those having a significant presence in passenger vehicles or two wheelers.”
Meanwhile, with new infections reported around the world now surpassing those in China, World Health Organization director General Tedros Adhanom Ghebreyesus has asked nations to be prepared for a pandemic, news reports said.
South Korea has become the new epicentre of coronavirus, having reported 315 fresh cases on Saturday. The country has now has 2,337 confirmed cases, the Korea Centers for Disease Control and Prevention said on its website. The viral outbreak has infected over 83,000 people globally.
World over companies have been asking employees to work remotely or from home to contain the spread of the deadly infection, while governments urge people to stay away from public places such as restaurants et al – a move that could hit consumer spending.
Factories and offices have remained shut in China, deepening concerns over the hit to global supply chains and demand outlook.
According to India Ratings, corporates could face an exogenous risk to trade, should COVID-19 intensifies in near term. The agency believes that in such a case, the impact on certain domestic sectors could be more pronounced and will be reflected in Q4 FY20 results.
“Indian corporates continue to face sub-optimal demand and pressure on balance sheet liquidity. The Index of Industrial Production fell 0.3% yoy in December 2019 (December 2018: up 3% yoy), and the manufacturing output contracted 1.2% yoy during December 2019 compared with 2.9% growth during December 2018,” it said.
India Ratings also said foreign portfolio equity flows increased to ₹12,100 crore in January from 7,300 crore in December but the sell-off in debt flows also intensified to negative ₹11,600 crore. The pick-up in equity flows, it said, could be partially explained by the diversion of flows from China which is coping up with the coronavirus outbreak.