• n-CoV
  • World Health Organization
  • Debt
  • Credit Pressure
  • CRISIL Ratings
  • Novel Coronavirus
March 13, 2020 location Mumbai

Covid-19: Credit pressure intensifies for India Inc

A credit alert is CRISIL’s opinion on a sharp and specific development. It conveys that CRISIL will revert shortly on the impact of the development on the ratings of those affected.

With the World Health Organization declaring the Novel Coronavirus (Covid-19) outbreak a pandemic, an unprecedented global disruption is at hand. The Government of India has suspended all extant visas (barring specified exceptions) with effect from today up to April 15, 2020. Such drastic containment measures are being implemented worldwide.


Earlier, on February 20, 2020, CRISIL had in an impact note1 said India Inc could be in a spot of bother if the pandemic prolongs. Since then, Covid-19 cases have more than doubled worldwide to over 1.3 lakh, fatalities have surged past 4,000, and the number of countries affected has quadrupled to ~114.


Consequently, clampdowns are increasing both within and outside India, which would curtail consumer mobility and lead to deferral of spending. While we expect most sectors to be impacted, this credit alert focuses on those at the front and centre of the pandemic-driven disruption.


We foresee business reducing for airlines, hotels, malls, multiplexes and restaurants. Demand for some products such as eggs and poultry could also be impacted. In the services sector, information technology would be affected because of physical restrictions.


Says Subodh Rai, Senior Director, CRISIL Ratings, “Lower business volumes and occupancies, and suboptimal efficiencies will impact the profitability of companies. While some affected companies may initiate cost-curtailment measures, these may not be enough given high fixed costs. That could impair the credit profiles.”


More importantly, near-term liquidity is critical to ensuring confidence in timely debt servicing as businesses adjust to the fast-changing operating environment.


CRISIL has ratings on around 875 companies linked to these sectors. The ability of these companies to sustain operations and ensure timely servicing of debt obligations will be monitored closely. Companies with healthy liquidity, lower debt and flexible cost structure would fare better.


CRISIL is analysing the credit profiles of these companies and appropriate rating action will be announced in due course.

1The n-CoV fallout