Surviving The Lockdown: What India’s Businesses Urgently Need
A person pushes a cart near the empty Gateway of India arch-monument during a lockdown imposed due to the coronavirus in Mumba. (Photographer: Dhiraj Singh/Bloomberg)

Surviving The Lockdown: What India’s Businesses Urgently Need

A half assembled car abandoned on an assembly line as the factory shutdown in a hurry.

Trucks idling at a state border, the driver struggling to prove that packaging of essential goods is also essential.

A vacant project site as the workers trudge back hundreds of kilometres to their villages.


First states shutting down and now a 21-day nationwide lockdown has given scenario planning a whole new meaning across businesses in India.

Enabling tens of thousands of employees to work-from-home, safely shutting down facilities, watching closely over suppliers and their financial health, and praying the customer returns soon.

That’s just one part of the problem.

Keeping the financial wheels of the business turning for 21 days despite no revenue...nationwide. That’s a different level of unprecedented.

Senior executives at three different businesses narrate what the past few days have been like and make clear the challenges facing the economy.

“Right Now It’s Just About Trying To Connect The Physical Supply Chain”

Tea and coffee are not on the list of essentials in one state, but they are in many others, a senior executive in a consumer goods company tells me as he explains how difficult the past few days have been to keep factories running and goods moving. The central government exempted “essential goods” manufacture in its 21-day lockdown notification. But sans a clear definition, different states have different views on what is essential.

And even when they agree, unanticipated gaps appear. For instance, assume soap is on every state’s essential items list - but what about the packaging for soap? That consignment is stuck on some state border as the trucker negotiates with local authorities desperately trying to convince them to let him pass. The logistics company and the consumer goods company are trying to resolve this with senior executives working out of home. So are the various government authorities. At home. If the private sector is valiantly coping - shifting thousands of employees home, reworking internal tech systems, connecting everyone - imagine the state of the public sector.

The days are 14 hour long. The factories underworked. The store shelves bare.

“Our factories are working at 10-20 percent capacity. Hopefully that will change in a day or two.”


For that to happen

  • States need to talk to each other.
  • There needs to be uniformity in definitions across states.
  • States should have discretion to allow goods not on the list.
  • Transporters should be allowed to self-declare that they are transporting essential goods.
  • Or allow consumer goods companies to put lists on trucks vouching for the nature of goods.
  • Apply the same mechanisms not just for finished goods but also for raw materials, packaging etc.
  • And allow companies to issue letters to employees across states so that they can get to work and ensure the production of essential goods.

Fear is already driving too many workers away, even though the company has spared no effort or expense on preventive measures, he says.

What about financial issues, cash in the system? We are supporting distributors if needed. For the moment that is manageable. Right now it’s just about trying to connect the physical supply chain, he says.

A sign advises customers not to panic buy goods outside grocery store in Mumbai, India, on Wednesday, March 25, 2020. (Photographer: Dhiraj Singh/Bloomberg)
A sign advises customers not to panic buy goods outside grocery store in Mumbai, India, on Wednesday, March 25, 2020. (Photographer: Dhiraj Singh/Bloomberg)

“Don’t Look At It As Some Favour Corporates Are Seeking”

The last month of the last quarter of the financial year is the busiest collection period for this leading infrastructure company. We collect Rs 5,000 crore a week in March, the company’s chief financial officer says. That is now down to a trickle.

How much have you collected so far?

A tenth, maybe.

To compound matters, the National Highway Authority of India suspended toll collection on all national highways. His company just invested in adding tech infrastructure to enable FASTag (digital payments) at many toll booths. There’s no social risk in digital payments, so why should all toll collection stop, he asks.

Project sites have emptied out, most workers would have walked halfway home by now. Government officers are also working from home. Well, maybe not quite working. Their lives are so “paper infested” he says, nothing moves if the file doesn’t. At home there are no files to move.

Will work resume on Day 22, I ask.

I’m not very sure if Day 22 will be business as usual. I’m looking at it as a break longer than 21 days.

The three weeks will throw up more questions than answers.

What happens to projects with RFPs (request for proposal) out?

Will prices stay the same?

What if oil prices change dramatically?

Or, production constraints push prices of other goods up?

What about contracts facing force majeure triggers.

Maybe governments (central and state) will cut back further or divert some expenditure away from infrastructure to healthcare?

Already many multilateral agencies, that fund large projects, have put all credit decisions on hold.

April and May will be spent resolving these. And then the monsoons will arrive, he reminds me.

“The first half of next fiscal looks virtually depressed. We are looking at business scaling up only in the second half.”

Large companies will pull through, but with revenue affected how will other businesses (vendors, customers) service debt? Corporate bond and commercial paper yields have hardened. And on March 31, lots of systemic CPs are maturing, he points out.

The government needs to mitigate the financial impact and address concerns around liquidity, he says.

  • Rollover all corporate debt by 30-60 days.
  • Relax thresholds for NPA classification.
  • Extend additional lines of funding to existing borrowers.

There’s more...

Club earnings announcements for the first two quarters of the next fiscal, he recommends. The first quarter will be bad for every, no point in spreading panic.

Ask states not to do anything in an uncoordinated manner, he says, pointing to a Tamil Nadu notification that disallows collection of principal payments by micro-finance lenders.

Most importantly, allow credit rating agencies to freeze reviews for a period of time.

‘If a credit rating company calls me on what basis do I give forecast of cash flows at this point?”

When the pandemic effect settles businesses too will need to heal. Don’t look at it as some favour corporates are seeking, he says. It’s about survival.

Migrant workers walking back to their villages and homes after a nationwide lockdown was imposed. (Photo: PTI)
Migrant workers walking back to their villages and homes after a nationwide lockdown was imposed. (Photo: PTI)

“How To Be Prepared For What Level Of Demand And Where”

You don’t know when the customer will return. So you need an evolved team that can do scenario planning. You need to plan supplies for each scenario and sync up with vendors. And, you need to get all this broadly right, a senior financial executive at a leading automobile company explains to me when I ask him what his business continuity plan is about.

Build for sale, not for inventory, he says.

That’s about precise timing. How do you get that right in such an unpredictable situation?

You know vanilla will sell, so make vanilla.

His company anticipated the nationwide shutdown, and started scaling down manufacturing in the second week of April itself, unlike a few peers. Now his team is at home, but busy with, yes, business continuity planning.

What does a business do when it faces such an unprecedented shut down, I ask. There are four stages in such a situation, he responds.

Stage 1
Achieving a smooth shutdown, especially for continuous process plants.
Ensuring the safety of all employees and workers.

Stage 2
Keep teams occupied.
Great time to do training programs.
Ensure governance processes go on.

Stage 3
Get ready for the return of employees and workers.
Plan what sequence you need them to return in.
Same for suppliers.

Stage 4
Methodically plan work resumption.
Ensure safety of processes and people.
Restart operations.

On day 22 will production return to normal, I ask him the same question I put to the others. Covid-19 has delivered a hard core demand shock, he emphasises. Restarting the factories will take two days or so. But more difficult will be resuming supplies - and by how much.

How to be prepared for what level of demand, and where - that’s what he’s consumed by.

By watching sales data of agricultural goods to cement in the early days after the lock down is lifted. Staying in touch with customers. Ensuring there is no rigidity in the plan.

“The challenges are lack of knowledge on demand and the fear of a liquidity shock in the system.”

Here’s where the conversation turns more grim. We need to prevent a liquidity shock, he warns, using an example that brings home the demand and financial challenges.

Imagine an ice cream company. It will be sitting on peak inventory now. If it doesn’t get any revenue the business won’t survive a few months later.

Cash is critical for every business right now, he says, expressing concern at the delay in announcing relief measures for businesses. This is the time for big measures, unhampered by bureaucracy.

  • Impose a moratorium on all loans.
  • Let RBI buy corporate bonds, commercial paper for 3 months.
  • Renew all maturing loans on the same terms for 3 months.
  • Remove group borrower limits.

“The patients (businesses) are bleeding, some will fall now, some later. But fall they will.”

Unless they get a liquidity transfusion.


PS: On Friday late morning the Monetary Policy Committee announced an emergency 75 basis point rate cut and the Reserve Bank of India announced a moratorium on all loan repayments and a deferral of interest payment on working capital - whilst ensuring no impact on credit profile of the borrower.

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