70 per cent of listed companies will be forced to withdraw money from cash reserves to pay salaries

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Mumbai, Ta. May 2, 2020, Saturday

As many as 40 per cent of the companies listed on the country's stock exchanges have not had any revenue in April or even a small amount due to the lockdown on Kovid-18, which will force them to use the money in cash reserves to pay their employees and other fixed expenses.

Out of the listed companies, 12 are manufacturing non-essential products and their cash flow has also been affected. At the end of March 31, 2018, these companies had about 20 lakh full-time employees, whose monthly salary bill averaged Rs 21,000 crore per month in the first six months of the last financial year. In addition, the monthly interest payments of these companies were around Rs 2,000 crore.

In the April-December 2017 period, these 12 companies had to pay a total of Rs 2.7 trillion in salaries and wages and a total of Rs 4.5 trillion in interest on borrowings, according to an analysis.

About 7% or even 30% of the listed companies are manufacturing essential goods. These include food processing, banking, telecom, insurance, pharma, etc. The cash flow to these companies was also continuing in the lockdown.

Companies manufacturing non-essential products, i.e. 90 per cent of their revenue, are stuck in a cash crunch due to the lockdown and will be forced to raise money through their cash reserves and other sources to cover salaries and other necessary expenses.

Companies in some sectors, such as the auto sector, have had zero or no April sales. We will be able to pay most of the April salary and that too using reserve cash. "But if the situation continues, it will be difficult for us to pay," said a company CEO.

Garment and textile companies are the largest employers in the country. At the end of March 2016, the number of full-time employees in these sectors was around five lakh.

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