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Wednesday, September 30, 2020

Amid staggering losses, India Inc says recovery depends on course of pandemic

Q1FY21 results were marked by severe disruptions to the supply chain as also demand, with much of India locked down for most of the time.

By: ENS Economic Bureau | August 10, 2020 1:55:39 am
As of now, the Nifty companies are expected to report a 5-10 per cent drop in profits for 2020-21 before rebounding smartly in 2021-22. (File)

Corporate India’s Q1FY21 results were marked by severe disruptions to the supply chain as also demand, with much of the country locked down for most of the time. To that extent the numbers are less helpful than the commentary in giving us a sense of what to expect in the rest of the year.

Nonetheless, the losses are staggering, exacerbated by the regulatory provisions made by the telcos, and it will take an exceptional performance in the rest of the year to reverse the trend. As of now, the Nifty companies are expected to report a 5-10 per cent drop in profits for 2020-21 before rebounding smartly in 2021-22.

The good news is that despite local lockdowns, several economic indicators — e-way bills, electricity, registrations of cars and two-wheelers, container traffic have started looking up.

Moreover, capacity utilisation at factories, too, is increasing as migrant labourers return.

Nonetheless, the management commentary has been cautious with chief executive officers (CEOs) reminding us that the growth trajectory will depend on how soon the pandemic subsides and how quickly business activity picks up.

They have also cautioned that the high frequency data for June and July don’t reflect the full picture since some of it is simply the pent-up demand getting fulfilled. The numbers, they say, could taper off.

CEOs have also pointed out that with thousands losing their jobs in Covid-impacted sectors such as civil aviation, hospitality, tourism,trade and retail, the cap or cut in incomes in many companies, the near-total absence of fresh investments by the private sector and also increasing automation and digitisation demand is bound to remain weak. —FE

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