The pain will radiate as India Inc heads towards ~15% decline in revenue and ~25% fall in earnings before interest, taxes, depreciation and amortisation (Ebitda). For MSMEs, the fall in revenue will be steeper at 17-21%, while Ebitda margin will shrink 200-300 basis points to 4-5% as weak demand gnaws away gains from lower commodity prices.
A sharp decline at the operating level will also impact creditworthiness, aggravating the liquidity stretch these units have been grappling with, particularly on the working capital front.
In the process, average interest service coverage ratio could slide to 1-1.5 times from 2.4 times seen between fiscals 2017 and 2020, even after factoring in the benefit of moratorium on interest payments announced by the Reserve
Bank of India (RBI). Sans moratorium, the ratio would have gone below 1.
The challenges would be the hardest for micro-enterprises, which account for 32% of the overall MSME debt, and are facing material stress in terms of revenue growth, Ebitda margins, and working capital stretch.
Previous downturns have shown that micro and small enterprises are unable to manage transient working capital challenges as easily as their large and medium peers. To that extent, the measures announced by the Ministry of Finance and the RBI, nudging banks and other institutions to lend more, will help them tide over tapered cash flows.
The bigger issue, however, is demand, which needs to revive for growth to improve sustainably.
Bu hikaye SME World dergisinin July 2020 sayısından alınmıştır.
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Bu hikaye SME World dergisinin July 2020 sayısından alınmıştır.
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