Top 250 companies in India saw huge impact on their profit margins, capacity and growth outlook: EY report

Mumbai: Covid-19 and the lockdown to contain the pandemic have severely hurt the top 150 listed Indian companies and 100 multinationals, as they witnessed a steep decline in their profit margins, borrowing capacity and growth.

As per an August report by EY India, ‘Early impacts of the COVID-19 pandemic on Indian corporate reporting’, most companies and their statutory auditors struggled with the reporting timelines and procedures.

As per the report, debt service coverage ratio and interest coverage ratio, which measure a company’s cash-generation capacity to service interest and debt, have been severely impacted due to the pandemic. Listed telecom companies saw a 95.5% fall in their debt service ratio and a 62% drop in interest service ratio between December 2019 and March 2020. In the aviation sector, which couldn’t generate cash, the debt coverage and interest service ratios dropped 87% and 90%, respectively, while in oil and gas, the declines were 43% and 39%.

An analysis of the December and March quarter’s results of the top 31 listed banking, financial services and insurance companies, two oil and gas companies, and nine automobile companies show that their earnings per share dropped 37%, 250% and 30%, respectively.

Industry trackers said going ahead more listed companies would have to disclose information around the Covid pandemic and its impact on their operations. Sandip Khetan, the national leader at EY India’s financial accounting advisory services, said: “In current times, corporate reporting has become even more important to earn the trust of the investors and other stakeholders, where stakeholders are seeking information on the disruptions of current financial standing of an organisation due to Covid-19.”

The report said only 37 of the 150 listed Indian companies provisioned or disclosed the direct impact from the pandemic. These companies saw an inventory write-down of Rs 5,558 crore, provisioned Rs 16,873 crore for credit loss and witnessed impairment of Rs 2,185 crore.