As many as 159 companies listed on the BSE cumulatively saw a decline of Rs 22,538 crore in their EBITDA in the three months ended March 2020 compared to the December quarter, reflecting an early impact of the coronavirus pandemic, says a report.
EBITDA stands for earnings before interest, tax, depreciation, and amortisation.
For the report, leading consultancy EY India analysed March quarter results of the top 300 BSE-listed companies and 115 global firms spanning over 12 sectors to evaluate the impact of Covid-19 disruptions on their reporting calendar, profitability, financial position, liquidity, disclosures and other key parameters.
“The analysis relies on details of the pandemic’s impact as presented by companies in their results or any public document pertaining to their quarterly reporting,” EY India said. It was done for the March quarter results of top BSE 300 companies that were announced till June 5.
Most of the companies experienced a material impact on financial performance indicators such as EBITDA, revenue, debt and interest service coverage, provisions, profitability as and earnings per share (EPS), it noted.
As per the report, 159 BSE 300 companies saw Rs 22,538 crore decrease in EBITDA in the March 2020 quarter compared to the preceding December quarter, 2019 “as early impacts of pandemic and resulting changes in macro-economic factors,” EY India said.
Sectors that experienced significant negative influence of the coronavirus pandemic and unfavourable macro-economic changes were BFSI (banking, financial services and insurance) aviation, automotive, power, oil & gas and travel, it noted.
EY India also said that pharmaceuticals, healthcare and telecom, barring provisons related to AGR dues, showed positive growth during these difficult times.
The first case of coronavirus was reported in the country in late January. In the wake of the coronavirus pandemic, a nationwide lockdown was imposed on March 25 and restrictions were eased from May end onwards. Lockdowns had significantly impacted economic activities.
“One of the primary reasons for the negative impact on EBITDA and profitability was the significant increase in provisions around credit loss, impairment, inventory write-downs and additional impact of Covid-19,” the report said.
Overall, Rs 17,000 crore of credit loss provision by BFSI sector, Rs 2,000 crore of impairment provision significantly contributed by power, metal and mining sectors, and Rs 5,500 crore of inventory write-downs by oil & gas sector, in aggregate, resulted in around Rs 25,000 crore of provisions. These figures are for the 159 companies in the March quarter.
“Comparatively, it is notable that 115 global companies in turn have reported in aggregate Rs 2,52,000 crore of provisions on account of these reasons,” it noted.
The report also showed that there have been significant deferrals in reporting March 2020 quarterly results on account of timeline extension by Sebi as compared to March 2019.
As on June 5, 141 out of the BSE-300 companies were yet to declare their results, the report said.
Sandip Khetan, Partner and National Leader of Financial Accounting Advisory Services (FAAS) at EY India, said there is a significant shift in investor communication strategies, content and frequency by companies during the Covid-19 times.
“The pandemic has pushed investor communication to newer heights by making the corporate world answerable on many indicators other than financial numbers… Transparent, forward-looking and timely reporting based on balance between financial and non-financial data is the need of the hour,” he added.