View From The Ground - Impact of COVID-19 PDF

View from the ground – Impact of COVID-19
April 18, 2020
A&M India Point of View
CONFIDENTIAL – NOT FOR DISTRIBUTION

Table of contents
Sectors Covered:
A&M Playbook – Manage Crisis, Win the

02 Medical Devices 33
Future
Logistics 05 Healthcare Delivery – Hospitals 36
Aviation 10 NBFCs and HFCs 40
Retail 14 Banking 46
FMCG 18 Industrials / Manufacturing 54
Food Service 23 Power 59
Hospitality 27 Real estate 63
Pharmaceuticals 30 Roads 67
1
A&M Playbook – Plan Now to survive, avoid lender defaults and
to win in the “new” normal

Applying A&M’s Playbook (1/2)
Businesses must pivot to cash to tide over immediate crisis and build scenarios for medium
term
Here & Now – Manage crisis
Build “worst • Factor in expected dramatic decline in sales, up to 50-100% loss of topline will be needed in some industries
case” scenarios – • Force business unit leaders to create alternative worse case models
Pivot to Cash • Pivot to cash – tactical decision making to conserve cash
• Rationalize all marketing / advertising spends; focus on social media on how they are helping with and dealing with COVID-19 in
the community
Aggressively • Re-assess all non-critical expenses; drive value engineering targets for cost reduction across G&A spends and working capital
rationalize spend • These scenarios will likely prompt more severe actions beyond what operating managers are likely to take on their own
• Take strategic payroll and headcount decisions
Next 4-6 months – Plan now to win later

• Need to consider impact on supply chain and identify alternative suppliers, modes of transportation, and facility footprint
• Plan for sub-optimal availability of raw material and packaging material even post lock-down after current inventory gets
Build operational exhausted in a month
scenarios • Prepare contingency plans for sustained blue-collar labour shortage
• Plan for supply chain shocks and discontinuities because of shortage of drivers, loaders and remnant regulatory hurdles
• Make actionable plans related to employee actions, shutting down facilities, reducing inventories, etc.
• Original product plans are likely optimistic with focus on future sales; in current scenario, prioritize business segments, product
Prioritize
categories and channels in line with the operational contingency plans
business • Right-size the network and optimize footprint; prioritize the right channel partners and retail touch points
segments & scale • Prepare to take advantage of potential consolidation opportunities when the immediate crisis recedes
Focus on critical • Identify critical capabilities in the value chain including vendors / suppliers, contract manufacturers, people, channel partners
operational • Plan and adopt ways to remain engaged with critical partners on exception basis to the “Here & Now” plan
drivers • Select investment in critical operational areas to minimize the risk of disruption
3
Applying A&M’s Playbook (2/2)
Businesses must realign and execute operational and financial restructuring/sale for medium to
long term sustainability
Next 4-6 months – Plan now to win later (contd.)
Initiate discussions
• Initiate discussions with the lenders and investors
with stakeholders
• Sensitize them of any imminent liquidity mismatch
on liquidity • Highlight various structural issues which has forestalled business continuity
position
• Onboard lenders/vendors to agree to implement a moratorium through a standstill agreement
Onboard lenders/
• Avoid any ungainly actions
vendors and agree
• Seek time for working out resolution alternatives
to a standstill • Appoint agencies for protective measures
• Consider raising interim financing through equity or priority debt

Raise interim
• Determine the potential financing partners
financing • Explore emergency liquidity/financing programs introduced by the regulator/banks/financial institutions
Medium to long term – Restructure/sell

Execute financial • Work out a feasible restructuring plan in discussions with various stakeholders
restructuring / • Put forward various alternatives before the lenders to identify the optimal resolution plan
refinancing • Assist resolution plan implementation in a time efficientmanner
Sale of non-core • Determine the impact on the business from the sale of non-core asset / business
assets and • Determine structure of sale of the asset: Slump sale vs. share sale (minority sale or 100% sale of the asset / business)
businesses • Identify and reach-out to the potential buyers of asset / business and execute sale
• For over 35 years, A&M has been helping clients tackle tough business issues, recessions, crisis management, boosting operating
performance and providing long term solutions
• A&M’s specialized teams of operators and transaction advisors will help the clients in planning and executing the above action plan
4
Logistics

Logistics value chain – hot spots
Movement of goods across the value chain continue to witness unprecedented hurdles due
to supply side issues
Exports
Custom clearance Sea Port
Sea Port
4 Secondary
Transport
Airport Airport
Domestic
Inbound Market
TPT
1
Central
warehouses Stockists
Regional Tertiary
Inplant
2
warehousing Transportation
activities
Primary TPT Retail Outlet
Factory
.
. Modern trade
Inbound
. TPT
Central
warehouses Households
3
Last mile delivery
6
Long distance transport available for select cargo; adhoc
pricing
Current challenges and response
1
• Transportation volumes (truck loading per day) continue to remain @ 15-20% in the fourth week compared
to first week of March (only 50% of essential commodity demand being met by transporters)
• Road freight up by 20-80% across locations; pricing expected to stay volatile in the coming week;
Passenger aircrafts start operations for movement of cargo including the cabin space – air freight is up 4-
5x of normal price for domestic cargo
Transport
providers trying • Rail substituting road for mid-mile movement to evacuate goods – first and last mile still an issue
to build • Notification dated 15th April 20 from MoHA likely to improve labour situation resulting in better loading and
capacity to unloading of trucks – transporters planning to increase capacity as per zoning announced by government
meet expected • Improvement in transport ecosystem in the last few days
increase in
demand from • Loading/Unloading labour – labour has improved from 10% to around 25% of capacity (labour
capacity to improve to 40-50% in next one week)
next week
• Driver shortage continues across all geographies and lanes
• Enroute support – food is available, maintenance and breakdown still an issue
• Outlook for next few days – unlikely that labour or driver issues will ease off while in lockdown.
Streamlining of existing rolling stock capacity expected to improve in the coming week
7
Warehouses and storage infrastructure operating with limited
resources impacting throughput
2 • Import warehouses are full; evacuation a big concern; disputes on storage cost are on rise; deliveries out of
warehouse very slow
Warehouse
operators • Transit warehousing running at less than 30% of goods occupancy compared to average stocks for most
struggling with FMCG and food companies (Inflow of cargo into warehouses has dried up – for domestic consumption)
lack of
• Labour continues to be a big challenge; local manpower available (warehouses operating at 20% of
manpower manpower capacity)
resources and
evacuation of • Cold chains operating with skeletal staff impacting throughput – cost of warehousing has gone up due to
cargo extra incentives being paid with lower productivity
• Warehouse operators have negotiated land leases for 1-3 months with land lords
• Hyperlocal deliveries continue – using less than 10% of overall last mile capacity; line haul and hubs are
3 closed
Last mile • Companies evaluating options to start ecommerce operations from next week – specially for essential
transport – products
temporarily • Multiple levels of control – MoHA has provided information to start ecommerce operations; however, state
suspended government, local urban bodies and society rules may not be in sync in near term resulting in supply side
across constraints
• B2B supply of goods to stores and distributors likely to resume but with less than 25% effectiveness for next
few days
8
Ports facing yard capacity constraints with limited evacuation
capability
4 • Operation within port boundary –stable – Ports in South India continue to witness higher impact than west
Indian ports due to lockdown
• Exports down 34.57% (YoY); Imports down 28.72% (YoY)
• April volumes down by around 30% at major ports; March volumes were not impacted (Volume expected to
Port volumes further reduce by end of April – visibility of increase in trade from China but Europe and US volumes are
continue to be down)
subdued
• Ports are dealing with pendency; yard utilization very high (resulting in reduction of capacity; this issue is
expected ease in the coming week)
• Ports are working with railways for faster and efficient evacuation
• Outlook – Port volumes expected to reduce additional 15% in the next two weeks
9
Aviation

Aviation sector is facing an unprecedented challenge as it
deals with the lockdown to tackle Covid-19 pandemic
India has closed its International and Domestic borders till 3rd May’20
• AIRLINES
• Some airlines are ready to operate at 50% capacity with limited staff and no meals on the aircraft,
others are expecting 25% start post lock down; only essential flights are operating for official use
(no commercial flights)
• Cargo operations has taken a hit for the airlines with no freighter aircrafts as operating passenger
flight just with cargo is cash negative for airlines; few airlines have temporarily converted the
Business passenger aircraft to carry cargo in the main cabin to accommodate up to 10 tons of essential
Impact cargo
• AIRPORTS
• Very few passenger flights are operated (~1 per day – mostly for evacuation for stranded
passengers)
• Cargo flights are operated only for essential services – 10-20% of the capacity; expected
improvement in the no. of cargo flights in next few days as the government is expected to allow
more goods besides essentials
• Operations are reduced only to managing daily flights and maintenance works
11
Operational challenges are being faced across all aspects of
business, future liquidity being crucial (1/2)
] • AIRLINES
• Contract staff – Not reduced/released the contract staff till now and their salaries are being paid
• Employee salaries – Some airlines have cut 25% employee salaries; others have paid employees
below a certain grade till 24th March and LWP (leave without pay) post 24th March until end of March;
decision pending on April salaries; senior management March salaries have been deferred and also
being asked to take a pay cut
• Readiness to start operations
• Airlines do not foresee staff related challenge post lock down as operations are expected to
start at reduced scale
Business • Airlines are using the lockdown period to maintain / sanitize aircrafts, procure safety essentials
Operations for its frontline staff and also relook at network profitability and close unprofitable routes
• Vendor payments
• Are being deferred and only essential payments are being made; no vendor negotiations have
fructified as yet to result in savings; parking charges, IT network charges are being incurred
• Only BIAL has given some forbearance on the airport charges during the lock down period, no
other airport has relaxed any charges so far
• Aircraft deliveries
• No deliveries have been deferred as yet, but Boeing and Airbus are also facing challenges in
deliveries; If the situation persists, decision to defer aircraft deliveries will be taken;
redeliveries are being advanced at the moment
12
Operational challenges are being faced across all aspects of
business, future liquidity being crucial (2/2)
• AIRPORTS
• Cash
• Sufficient cash for next 90 -120 days.
• Employee salaries –
• No manpower / salary reduction planned for next 2 months and hiring is completely frozen
Business • If the situation persists post 3 months, there may be some impact.
Operations
• Vendor payments
• If operations continue to remain shut, then the operating contracts have a termination or
suspension clauses which may be enforced to save cash.
• Part of the operational expense is paid by AERA however cashflows are impacted due to
severe reduction in the capacity utilization (no. of flights/ passengers)
• In the current situation the cashflows are manageable for 2-3 months to pay the fixed costs
13
Retail

Lockdown across the country has resulted in non-grocery
retail businesses coming to a complete halt
Nation wide lockdown has resulted in significant business decline
• Business had dropped to 20% - 25% by end February and further reduced to 15% prior to lockdown
• Industry may witness losses of ~half a billion dollars due to closure of malls, stores and factory
production
• Job losses imminent – 1.5 million modern retail stores in India employing 6 million people; several small
players may have to shut shop
Traditional retail has come to a halt except for stores stocking essentials
• Non grocery retailers most impacted; Super/hyper markets and kirana stores selling essentials have
Business restricted range to 400/600 SKU’s and halted other categories such as general merchandize and apparel
Operations Significant delays in delivering online orders, while being open for essentials during lockdown
• Warehouses closures (for Big Basket, Grofers etc.), supply chain and transportation issues adding
complexity (movement of essential items across state borders has now resumed)
• Shortage of delivery staff for both, e-comm and offline players offering delivery options, due to return of
migrant workers to villages
Companies estimate the revival to be sub-50% in the first 3-4 months post lifting of restrictions
Expect a significant rise in schemes and discounts and high likelihood of early EOSS by brands due
to high inventory, potential liquidity issues and limited footfall in the first 3-4 months
Large brands reaching out to customers digitally through their CRM platforms
15
Grocery retailers are focusing on online delivery models to
serve the customers
Business Deferring/ adjusting SS20 and AW20 orders
Operations
(contd.) • Companies have cut back on EOSS (SS20) and AW20 orders and delayed larger fabric vendor payments
Online/ delivery model shift

• Some large players (e.g. Big Bazaar) have initiated online delivery models
• National & Local supermarkets are tying up with e-commerce players with bandwidth to augment
Delivery Model
delivery personnel
• Contactless delivery options introduced to manage safety concerns of customers
• COD model temporarily halted by e-commerce companies for better liquidity management
Salaries and employee related measures

• Most large retailers have started planning & rolling out salary/ bonus cuts; limited lay-offs are also being
considered in the near-term
Employees • Smaller players are witnessing salary delays or salary cuts especially for the senior management based
on their liquidity position
• Leading retail chains (e.g. Big Bazar, More) are providing transportation and additional hardship
allowance to employees (INR 400/500 per day)
16
Managing liquidity and cutting down costs has become the
key focus area
Rent delays and letters to landlords

• Companies have received deferrals/ partial waivers on rentals, during the period malls have been closed
(as per contract)
• High street stores have shifted the business model from a fixed model to revenue share model to handle
Cash and the reduced volume in current crisis
Admin
Cash conservations efforts
• Companies facing liquidity crisis have deferred all vendor payments except a few strategic vendors and
exploring options to max out the drawing limits
• Capex has been halted by most players (including new store opening, refurbishments etc.)
Communication with authorities

• Representation was made through FICCI and CII to PMO office to sort out issues in essential item
Communication deliveries
with Authorities Government relief package
• RAI has written to the GOI for a retail relief package similar to that announced by countries such as
Singapore, UK and USA
17
FMCG

Consumer products value chain – hot spots
Multiple legs of the supply chain have been severely impacted
4
Unorganized
Inputs Retailer
2 Short shelf life products
retail
(domestic)
Distributors
3
Own E.g. e-tailer
Key accounts
DCs
1 C&F agent
Long shelf
life products
Inputs Contract Modern trade Retail outlet / Organized

(import) distributor Via Retailer DCs store retail
Short shelf life products directly to retailer
1 Procurement & Contract Manufacturing 2 Regulatory, Labor and Portfolio Changes
3 Supply Chain 4 Distribution, Store Mix & Last Mile
19
Companies across FMCG segments have started
preparations for post COVID-19 scenario for all functions
Essential Non - essential
List of items within essentials has expanded over last 2 weeks Most non-agriculture raw
1 material is available but
Plant utilizations have gone up by ~300-700 bps in the last 2 weeks due
transportation is constrained
to visibility of demand and supply chain
• Existing inventory being
Fresh supply of agri-commodities impacted
utilized
• Local mandi largely shut due to labour shortage
• RM inventory ranging from
• Existing inventory could last for up to 90 days at current utilization 25-70 days, could extend to
• Imported RM unavailable, e.g. palm oil 90 days at current utilization
Organized players looking to consolidate in fresh categories • Imported raw materials
• Better backward-integrated organized dairies increased sourcing by ~20% inventory for 21-30 days
Procurement and Packing material supply has eased out with supplier getting • Review imported RM by
Contract permissions in select districts/ regions country post lockdown;
exploring local substitutes
Manufacturing • Only 7-30 days of inventory
Contract manufacturing is
• No plans for alternate suppliers right now, as approvals are gradually largely shut down
expected to come in
Non-food & non-pharma
• Few players exploring PM substitutes but low priority, has high lead time businesses starting to get
• Planned bulk purchase of PM when lockdown ends, however supply could permissions to operate few
be constrained lines in select plants
Players relying largely on own manufacturing • However, high inventory,
• Most contract manufacturing units are shut; Not exploring alternate operating constraints and
suppliers for now as approvals are arriving gradually limited labor availability has
led to limited activity
• Liaising with SHOs, local police instead of DM for quick approval
20
Labour shortage impacting production by >50% for essential
goods
Essential Non - essential
Regulatory hurdles easing Production for products like

2 cigarette, most of personal
• Central government war-room becoming more active; frequent circulars
care is largely shut down
being issued daily
• Both white and blue collar
• Accelerated decision-making continues at a local level
labour not available
Factories operating at 15-50% utilization during lockdown
• Some household cleaning
• Only 30-50% labour attendance products getting notified as
• Companies with onsite workers less impacted (55-60% attendance) essentials
• No immediate plans of down-sizing or salary cuts
Production re-aligned
Better compensation being offered to retain available labour force
Regulatory, labour towards essential products
and portfolio • Up to 2x wages for available labour; rotation of labour force
• E.g. factories making ice
changes • Food and medical facilities being provided cream are shut down
Fresh food – Focus on long shelf-life packs • Beverage companies have
• Dairy companies focusing on milk (tetrapak) and commodities v/s value shut down sparkling
added products beverages to focus on
FMCG – realignment to core products packaged water and some
juices based on approvals
• E.g. packaged water, liquid soaps, some OTC
Short term decision making based on S&OP plan for next 1-2 quarters
Some MNCs have set up dedicated teams to identify stocks in the
chain, monitor trucks, monitor RM / PM, and factories
21
Severe last-mile challenges; emergency plans being
prepared for entire quarter at current levels
• Companies have taken a detailed stock of inventory and how long it could last
3 • Existing inventory could last for 25-70 days across products
• Non essential – only existing channel inventory being liquidated; tie-ups across channels being explored
• Freight outwards from factory is relatively less impacted
Supply chain
• Availability of transporters is lower by ~30%; challenge in pockets like Baddi
(inventory
management and • Sticker of essential commodity is pasted and goods are delivered safely
logistics) • Increasing direct shipment from central WH / CFA to e-comm/MT WH / stores
• Loading / unloading labour is not available for last mile
• Temperature control chain getting compromised for fresh products
• Distributors worst affected among partners owing to lack of feet-on-street

4 • Active distributors gone up from 5-40% two weeks back to 15-60% now
• Certain beverages, home care & personal care operating at 15% while essentials (oil, dairy) at 60%
• Wholesalers, CFAs, milk agents are more active (sales down by ~30-40% in Dairy business)
• Cash inflow from channel is constrained owing to labour shortage
• Cash and cheque collection / deposit is constrained from channel partners
Distribution, store
• Moving towards online collections, new payment platforms
mix and last mile
• Hence, more products being moved towards MT/ e-comm
• Rationalization by e-comm - focus on few even within the essential products list
• Pin-code based availability depending on supply chain viability
• Tactical changes being made to Go-To-Market
• Credit period increased from advance to 14 days by some but not in dairy sector; sales people taking orders
on phone; delivery boys collecting cash
22
Food Services

Business for branded restaurants, bars and QSR’s has seen
significant sales reduction
• Nation wide lockdown has led to dine-in operations coming to a complete halt since March 25, 2020
• Companies estimate the revival to be sub-50% in the first 3-4 months post lifting of restrictions
• Global organized players looking to consolidate the market with several smaller players facing
existential risk due to massive liquidity issues
• Smaller players impacted more (90%+ drop in operating volumes) with shift in focus to hygiene
• Among the larger players, mall-focused players (KFC, Burger King etc.) and less delivery focused
players have been severely impacted (80%+ drop in revenues)
• Online deliveries are helping businesses operate at ~20% of volumes
Business
• <20% of the restaurants in ~15 states currently operating for home delivery through online aggregators
Operations
• Policies and notification not being consistently interpreted across the chain – Delivery partners of online
aggregators - allowed to move as per guidelines, are facing hurdles due to curfew like situation in select
states As of today, online aggregators are operating only in 10-20% of the delivery zones
• Online aggregators are currently trying to hold back delivery partners from logging off and heading
back to their villages by providing minimum guarantee payments irrespective of number of deliveries
• Safety (social distancing) / hygiene concerns has resulted in lower demand for online delivery.
Aggregators witnessing 50-70% drop in volumes over the last 2 weeks even in the limited zones where
operations are continuing
• Agricultural produce not impacted largely, besides very fresh, short shelf life and seasonal material
24
Managing liquidity and enhancing safety standards are some
of the key measures being currently undertaken
Contact less delivery for online aggregators
Delivery Model • Options introduced either on Apps/ website or through coordination with delivery person
• Other hygiene measures such as use of masks, temperature screening, frequent sanitizing introduced
Cash conservations efforts

• Companies facing liquidity crisis have deferred all vendor payments except a few strategic vendors and
exploring options to max out the drawing limits
• Capex has been halted by most players (including new store opening, refurbishments etc.)
Rent
Cash and
Admin • Companies have received deferrals/ partial waivers on rentals, during the period malls have been closed
(as per contract)
• NRAI and most if its members have initiated communication to landlords for rental holiday during cash flow
crisis
• Likely real estate consolidation with larger players taking over locations of mom & pop outlets once crisis
recedes
25
Communication with authorities is also being initiated to
extend the validity of various licenses
Salaries and employee related measures
• Discussions initiated on job cuts as well as 20-50% salary cuts for managers and above - restaurants
attached to NRAI may take a common call
Employees
• Salary for March may be slightly delayed or paid partially (other than lower salary bracket) – insurance
benefits introduced for employees
• NRAI has put forward an application to the PF/ESIC authorities for delay in depositing dues
Licensing
• Maharashtra government has announced liquor license validity extension till 30th June (where expiry was
on 31st March 20) and renewal fees to be paid in 3 instalments in June, Sep and Dec 2020
Communication
with Authorities • Need to solve for other licenses such as NOC, Fire, Shops & establishment amongst others
Communication with authorities
• Online aggregators have reached out to relevant authorities to allow continuity of food delivery
26
Hospitality

Hospitality is one of the most impacted industry verticals with
the impact potentially extending till Q3 (1/2)
• Occupancy down by 70-80% in large hotel chains as well aggregator business
• Likely to see a washout Q2. Further, travel restrictions are likely to impact business in Q3 and beyond
• Hotels that have a few guests, who cannot return now, are operating with bare essential services
Sales/ Revenue
• Decision making to operate hotels has been decentralized based on local authorities guidance
• Restaurant are shut with only in-room dining with very limited set menu
• Conference and banquet business continue to be shut and likely to continue till end of Q2
• Positive cases of Covid-19 have been identified in certain hotels forcing management to undertake large
scale testing
• Most of white-collar staff (sales, finance, marketing) is working from home. Ops staff operating at 15-20%
• In some international hotel chains and platform business, senior management has take salary cuts of 25%
to 50%. Mid size Indian hotels have taken more drastic measures of stopping salary payment
Operations • Hotels with zero booking shut down due to lack of manpower
• Maximum focus on cost cuts. Across hotels, energy cost has come down by 60-70% duet to shut downs
• Daily food management for in-hotel staff and in-house guests is done through one central kitchen
• 1-week rolling stock being managed with relation to all food supplies. 2-3 key vendors are being retained
to manage this supply chain
• Hotels are trying to consolidate bookings across all hotels into a single location, shut operations in others
28
Hospitality is one of the most impacted industry verticals with
the impact potentially extending till Q3 (2/2)
• Singular focus on expense management and cost reduction
New • All Capex, M&A and renovations and projects put on hold
Development/ • Only essential renovations are being undertaken (like FSSI compliance)
Growth • Some network rationalization initiatives are also under way
• A leading hotel aggregator with aggressive expansion plans has put its plans on hold
• Downsizing and cost cutting is a consistent theme across all hotels

• Some hotel chains have announced pay cuts up to 50% and lay-offs, some MNC chains are adopting a
wait & watch strategy at this stage
Response to
• For international hotel chains, the key decision makers are based in global offices. Any key
COVID decision/initiative here would need their buy-in
• An Indian hotel chain has committed to all payments to its employees, vendors and partners
• Hotel are awaiting for any concessions to be provided post 20 April. However this is unlikely.
29
Pharmaceuticals

Pharma companies are seeing ~10-30% downward revenue
due to lower prescription medicines and new patients
• Most businesses are experiencing an overall 10-30% downward impact on sale
• Rx sale of all key players are declining – in some cases by as much as 30-70%
• Within Rx, prescription share of anti-infectives, respiratory, pain and gastro have increased while
Impact on Dermatology, Diabetes, Stomatology, Vitamins have significantly decreased
sales/revenue • Overall, self medication (~1/3rd of the market) has continued to be largely steady
• Chronic and semi-chronic market is seeing ~15-18% downward impact, as there has been a 70%+
downward impact on the 20% of new chronic buyers
• Spurt in Hydroxychloroquine demand is an upside opportunity for players like Ipca, Cadila, Torrent
• Salesforce is now being trained to engage in doctor calls / promotions using digital channels
• However, digital sales calls are only being pursued basis doctor consent
Sales force
• Incentives are now being driven by primary sales indicators; daily allowances are being replaced by some
firms with internet allowances
• While outward stock movement is getting more regularized, most manufacturing clusters are operating
at 30-50% of regular outward movement capacity
• Transportation costs have increased by 70-80% for most companies
Distribution
• Sales consolidation with larger distributors continues
• Pharmaceutical companies are focusing on large distributors accounting for 80%+ sale and
strengthening collaboration with online pharmacy players for distribution
31
Manufacturing units have been operating between 40-60%
levels across most manufacturing clusters
• Manufacturing utilization for most clusters between 40-60%; Baddi and Daman are particularly affected
where utilization is 15-20% and 20-25% respectively
Manufacturing • Manufacturing attendance is typically 50-65% across most clusters except Baddi and Daman
• Given restrictions on staff movement, many manufacturing plants have arranged for plant labor to stay
within plant premises or in close vicinity
• Low level of solvents and intermediates stock could affect manufacturing operations
• In some clusters, inward movement of packaging material and raw material has been an issue due
Sourcing to inter-state restrictions
• Supply of APIs and Intermediates from China is now more regularized
• Overall, sales outlook is that it would be 15-30% lower in the Q1 quarter

Business • With the lockdown getting prolonged, new buyers and prescription medicine are getting impacted; this is
outlook likely to pick up once prescription generation resumes
• Majority of sales calls likely to stay online / digital in the next quarter
32
Medical Devices

Most companies have scaled down operations on account of
low demand
• Hospitals have continued with the postponing elective procedures; Only emergency and admitted patients
are being considered for surgeries
• 70-80% decline in sales estimated for April. Demand is expected to revive back post lockdown
Sales/ Revenue
• Non-functional private diagnostic chains have led to drop in consumables sales, however government
hospitals continue to generate demand
• Hospitals continue to ban entry of any external personnel etc. and only stock replenishment is allowed
• Sales teams are focusing only on existing accounts. Services related to only emergency cases are being
provided. Engagement initiatives with doctors taken up digitally through video calls or online media
• Smartphone / email media are being used to understand customer requirements / replenishment of used
Sales Force up stocks
• On ground equipment servicing is operational for emergency purposes only. That too has a cumbersome
approval process for getting transportation / clearance passes
• Typically, trade inventory of 2-3 months is maintained in context of reduced procedures, hence inventory is
sufficient for 4-5 months for key categories with reduced volumes
• In March 2020, companies had stocked up distributors which operated at low levels of inventory. Sea
Distribution ports, air and road transfer are largely being used for transfer of products
• Many distributors have exemption passes allowing them to collect transferred stocks from ports
• Certain companies are looking to diversify into COVID related products e.g. PPE, masks, oxygen pumps
34
Limited risk of operational disruption due to low inventory
• For products listed under essential drugs list or companies manufacturing COVID-19 related items, plant
running capacities have increased to ~50% with the arrangement of exemption passes for the staff.
Manpower availability continues to be a challenge. Attempts are being made to run single shifts with 40-
Manufacturing 50% of the manpower
• Sufficient inventory in the context of reduced sales. Typically inventory of 2-3 months is maintained. No
stock up activities being currently carried out due to exemption from lockdown
• Sourcing of raw materials is not being perceived as an immediate risk. Suppliers in Europe and China are
operational but at reduced capacity of 40-50%
• Port clearance has eased out. Air cargo, sea port to port transportation is taking place in a restricted
Sourcing manner. The logistics charges have increased due to reduced utilization of airplanes, unavailability of
resources and priority being given to most essential drugs and devices
• Vendors have inventory of 2-3 months of raw material, resulting in limited sourcing issues
• Opportunities pertaining to COVID devices are being explored specific to consumables and low cost
New critical devices like ventilators
Opportunities • Government investment in healthcare is expected to ramp-up, leading to demand of low cost portable x-
rays and portable ultra sounds machines
35
Healthcare Delivery - Hospitals

Lockdown and deferment of elective procedures has led to
closure of day to day out patient clinics
Current challenges
• COVID readiness, hospitals have taken multiple measures and laid down protocols
• COVID / Flu / Respiratory clinics have been operationalized as a separate designated area in the
periphery areas of the hospitals
• Hospital in a Hospital, COVID quarantine / treatment area has been segregated within the hospital with
dedicated passage ways, lifts etc.
• 15-25% of ward and ICU bed capacity allocated as isolation beds. The bed allocation varies basis state
government directives
Business • Manpower for the COVID section is dedicated which is rotated in shifts. The manpower is typically rotated
Operations on a weekly basis
• ER’s remain functional and all emergent procedures continue where the specialists are ‘on call’ basis’
• Operational areas have been reduced due to low occupancies i.e. reduction in ward beds, # OT’s and
certain common areas leading to reduction in utility costs
• Long term disease management / electives like Obstetrics, Oncology, Dialysis etc. continue to be
functional. For example in Oncology the new registrations have reduced by 50% 60% and existing patients
have been advised to continue treatment course in chemotherapy and radiation
37
Drop in footfalls have forced organizations to emphasize on
tele consultation
Current challenges
• 70-80% decline in footfalls owing to strict lockdown measures in place starting from 25th March’20, with
routine visits to OPDs being avoided or postponed
▪ Occupancy levels down to 25-30% from a 60-70% (typical tertiary care center) levels pre-COVID with non-
essential surgeries being postponed
Sales / Revenue ▪ New patient admissions deferred to a certain extent in Cardiac and Oncology, but are expected to bounce back
faster
▪ Other specialties like deliveries, dialysis face limited impact
• Revenue is likely to degrow by 65-75% in April’20, with Q1 revenue impact is estimated 30-40% depending on
share of CONGO specialties
• Focus is on digital through tele-consultation and health apps.
• Tie ups with diagnostic players for home sample collection e.g. Wockhardt hospital & Suburban
Marketing Diagnostic for COVID test
• ATL spends have been stopped for now, exiting ATL (outdoor media) contracts are being curtailed
• Basic stock for consignment items / implants are available both at the hospital and with the distributor. In
case a distributor is not able to deliver, hospital authorities organize the basis the emergency
Supply Chain • General consumables are in stock which will last longer than usual and is available with the distributors as
well
• COVID consumables like PPE, hand rubs,

38 masks are a challenge in terms of availability
Managing liquidity and reducing spends has become the key
focus area
Current challenges
• Doctors : Reduction of 25%-50% for doctors on Minimum guarantee model OR conversion to a variable
Fee - for - Service model
Manpower • Nurses & Paramedical : Hiring freeze, with no layoff for now due to difficulty in ramping up in future
• Outsource Manpower basis reduction in operational area, count is reduced by shift
Other
• Reduction in utility expenses by10-20% on account of lower occupancy
overheads
• Renegotiation of rentals for Q1 and Q2 of FY20
• Accounts Payable : Major payables deferred like interest on loans and credit terms being renegotiated
with vendors with an exception to COVID related material
Managing Cash • Accounts Receivables : Delays expected in TPA payments and PSU payments for receivables
• All non COVID related Capex has been deferred
39
NBFCs and HFCs

Disbursements have been paused across products; collections
have been impacted owing to lockdown and moratorium
Current challenges
• Fresh disbursement have been paused

• Sanctioned and not disbursed cases have been put on hold; lenders are planning to re-
evaluate customers post lockdown
• Few fintech companies, especially in MSME lending, are selectively lending to grocery
and pharmacy retailers in a few locations
Disbursements
• Limited disbursement to existing customers
• Tranche disbursements (especially in home loans) and drawdowns from sanctioned
lines of credit are continuing
• Disbursement expected to ramp up to 30-40% and 70-80% of target by the end of Q1 and Q2
respectively
• Adopting a conservative approach to underwriting factoring in impact of COVID 19 on businesses

and individuals across industries for the next 2 quarters
• Increased usage of video based discussions to underwrite personal loans and SME
customers
Collections
• RBI suggested moratorium on all term loans not to negatively affect the credit scores reported by
financial institutions to the bureaus
• Liquidity infusion measures announced by RBI will ensure adequate flow to NBFCs and HFCs, however
the underwriting concerns still remain on assessing stress in multiple sectors
41
Credit policy changes, focus on existing customers with good
repayment records is the strategy to balance risk and growth
Current challenges
Lenders are tweaking their credit policy to factor the impact of lockdown and moratorium; Challenge is to
strike a balance between being conservative and remaining competitive
• Going forward, credit teams are expected to face challenges in assessment of customers
• Income / cashflows have been disrupted due to lack of business activity
• Due to customers availing moratorium, the current repayment behavior will not be representative
Enhancement of
• Impact would be higher for self-employed and MSME customers
credit policy and
programs • Key areas of change in credit assessment
• Intent to repay: 1. Stricter norms for policy parameters such as CIBIL cut off 2. Handling of customers
availing moratorium
• Ability to repay: 1. Change in income assessment methods as businesses will face downturn
2. Stringent norms for parameters such as FOIR, LTV, ABB, etc.
• Marketability of collateral (for secured loans): Enhanced assessment of marketability of collateral
In the near term, lenders are planning to increase focus on existing customers (especially non salaried
Tailored loan customers) and offer products to support them in distress
products for • Most NBFCs are planning to be more conservative in lending to MSME and self-employed customers
existing • Due to disruption in business, these customer segments are likely to be stressed; NBFCs will get a clear
customers picture of stressed segments only after the end of moratorium period
(continued…) • NBFCs are planning to adopt a ‘wait and watch’ approach for 1/2 quarters so that underwriting team can
understand the magnitude of recovery
42
Several other tailored products are being considered by
lenders along with focused phase-wise collections strategy
Current challenges
• In order to assist business volumes during slowdown, lenders plan to push tailored products
• Pre-approved loans: Some NBFCs with large customer franchise are planning to increase their focus on
Tailored loan existing customers given that they have visibility on customer’s repayment track record
products for • Top up (support) loans: Few NBFCs which are focused on non salaried customers are planning to offer
existing top up loans to select customers, who may have financing requirements to ramp up business post lockdown
customers • Restructured loans: NBFCs are planning to offer restructuring of loans (with / without top up) to select
(…continued) customers in order to reduce their burden of debt servicing
• Loans with flexible repayment terms: Few NBFCs are offering loans with options for only interest
repayment for a particular duration followed by bullet repayment of principal
Lenders have prioritized collections by cross functional utilization of teams and are defining a detailed
post moratorium collection strategy
• During lockdown
Higher priority to
• Lenders are engaging with customers through different media and educating them about moratorium
collections
• Emails, SMS, contact centers are being leveraged to reach out to customers as physical interaction is not
(continued…)
feasible
• Sales and credit (in some cases) teams are augmenting the collections team
• Digital modes of collection (UPI, payment wallet, net banking) are being used in bounce cases
43
Lenders are pushing for an early digital adoption especially
for customer to develop contactless business strategy
Current challenges
• Post lockdown
• Lenders are planning to establish physical connects with the customers through sales / collections teams
and understand the financial impact
Higher priority to • Detailed collections plan to be defined based on the situation on ground
collections 1. Day wise collection plans 2. Branch wise collections plan 3. Prioritization of delinquent customers to
(…continued) avoid slippage to NPA
• Post moratorium
• Execution of collections plan
• Sales team to focus on collections and assist in collections of other products in case of need
COVID-19 is likely to be an accelerator for digital adoption in lending space; lenders are utilizing the time
of lockdown to strengthen their digital platforms across the lending value chain
• Key drivers for digital adoption
• Preference for contactless interactions: customers, channel partners and employees would be
Acceleration of apprehensive about face-to-face interactions
digital adoption • Increase in familiarity with technology: work from home and social distancing have forced people to
(continued…) adopt technology in both personal and professional lives
• Enhancement of operating models of business of channel partners and customers: 1. Channel
partners plan to interact with their customer through digital model; furthermore, some lenders are utilizing
this time to train channel partners on how to use partner portal, if available 2. MSME customers such as
retailers have adopted digital means of order acceptance, payment, etc.
44
Push for digital adoption, cash conservation and cost
optimization across functions in the short term
Current challenges
• Key areas of digital intervention

• Customer acquisition
• Online channel for lead generation and onboarding
• Channel partner portal for case login and document collection
Rationalization of • Digital document collection through scans, links
operating costs • Credit appraisal
(…continued) • Video personal discussion (PD) for select customers
• Integration with API aggregators for access to data from public and private sources
• Collections
• Automated collection through e-NACH/e-mandate for current customers
• Integration with digital modes of collection such as payment wallets, UPI, etc. for delinquent customers
In the near term, lenders are looking to rationalize their operating cost to maintain profitability as
disbursements are expected to slow down and credit costs are expected to go up
Key initiatives by lenders to optimize operating cost
• Employees
• Freeze on new hiring for next 2/3 quarters
• Cash payout for incentives and rewards & recognition put on hold
Rationalization of • Capping of salary increments
operating costs • No headcount rationalization if the crisis gets over in 2-3 months
• Sales Channel
• Revisiting of channel mix, especially for small ticket sized loans
• Push for online channel: Incorporation of targets for online channel in business plan to increase focus
• Increased focus on sourcing through direct sales team
• Real estate: Engagement with landlords to seek rent holiday or deferment of rent payment for branches
• Other: Plans to cut down on non essential expenditure such as travel and other administrative costs
45
Banking

Significant impact from the COVID-19 pandemic due to
slowdown in industry (1/2)
• Continuation of operations: Country wide lockdown has been extended till May 3, 2020
Low impact on
banking • IMPACT: Prioritization of certain banking activities: Most banks have prioritized a few banking activities
and temporarily discontinued other activities during the lockdown period; employees are reporting on
operations
alternate days in many banks
• Most industry / service sectors under stress, leading to future stress for Bank’s lending portfolios:
Operations in many sectors (other than those under MHA exemptions) have been badly disrupted leading
Huge to a slowdown expectation in these sectors:
operational
• Sectors most likely to be impacted: Aviation, Auto / Auto-components, Cinema / Entertainment,
impact in most Consumer Durables, E-commerce, Hospitality / Tourism, Online Food Delivery, Real Estate, Retail,
industry / Ride-hailing & Temp Staffing
service sectors
• IMPACT: The aforesaid sectors are expected to become negative sectors from fresh lending perspective.
Existing exposures (especially SME exp.) in these sectors are expected to become SMA / NPA.
• Employees in sectors where revenue generation has taken a hit at risk of job losses: Employees in
Effect on aforementioned sectors who are vulnerable to job losses are expected to default on their Retail Loans
employees in (especially unsecured Personal Loans & Credit Card Payments) to banks.
affected sectors
• IMPACT: Hence such retail loans are highly vulnerable
47
Significant impact from the COVID-19 pandemic due to
slowdown in industry (2/2)
• Economic Slowdown expected to lead to a Banking Slowdown: There is a marked slowdown (and
possibly even a recession) expected in the Indian economy, which is expected to lead to banking
slowdown.
• Profitability of Banks would come under pressure: Banks would be worried about their lending
portfolios and also wary of fresh lending due to risks emanating from COVID-19 slowdown: Additionally,
lower interest and fee incomes at banks would lead to reduction in their Net Interest Margins (NIMs) and
reduce profitability.
Overall • Force Majeure clause invocations: Force Majeure (FM) clauses are being invoked by companies in
slowdown in many sectors due to COVID-19. (E.g.: Discoms are invoking the FM clause to cancel power purchase
banking growth obligations from GENCO's under existing PPAs as there is a significant reduction in power offtake from
industries which have temporarily shut due to the lockdown)
• IMPACT:
• Banks are worried about their lending portfolios and also wary of fresh lending due to risks emanating
from COVID-19 slowdown:
• Fresh or pending disbursements in most existing sanctions expected to be put under hold.
• Slowdown in corporate lending is expected to be followed by slowdown in SME & Retail Lending
• Increased chances of insolvencies being triggered under IBC
Huge • Banks expect significant relief measures from Govt. Ministries: Bankers are hoping for relief
expectation of measures from GoI and other ministries, some of which have already been announced by MoF and RBI.
relief measures • IMPACT: These relief measures are expected to somewhat cushion or delay the impact caused due to the
from GoI / MoF lockdown
48
IBC related measures announced by Finance Minister on 25th
March 2020 to address disruption
Announcement Impact
Minimum threshold for default to initiate CIRP is being increased
from INR 1 lakh to INR 1 crore
• Banks will now not be able to drag
any sub INR 1 crore defaulting
borrowers under IBC
This will largely benefit SMEs likely to face financial distress on
account of the economic crisis caused by COVID-19
Ministry of Finance (MoF) will consider suspending filing of
insolvency applications by FCs, OCs and/or by CDs itself (u/s 7, 9
or 10 of IBC) for a period of 6 months, if the COVID-19 crisis
persists beyond April 30, 2020. As of April 12, 2020, since official
announcement of lockdown extension upto April 30, 2020 is • If applicable, banks will not be able to
expected anytime, with chances of a further extension being high, drag any defaulting borrowers under
IBC for a period of 6 months, leading
announcement by MoF of suspension of insolvency filings by 6
to a reduced avenue for resolution of
months now looks to be highly probable. borrower accounts during this period
This is being considered to prevent companies from being

dragged into CIRP
49
On 27th March 2020, RBI announced certain stimulus measures to
reduce impact of the slowdown in economy induced by COVID-19 (1/4)
A) Measures for Ease of Financial Stress
Moratorium on Term Loans (TL)

• All Banks, FIs, NBFCs & HFCs (“lending institutions”) are permitted to grant a moratorium of 3 months on
payment of all TL instalments falling due between March 1, 2020 and May 31, 2020.
Rescheduling • The repayment schedule for such TLs as also the residual tenor, will be shifted across the board by 3
of Payments months after the moratorium period.
• Interest shall continue to accrue on the outstanding portion of the TLs during the moratorium period.
(for Term Loans
and Working
Capital Deferment of Interest on Working Capital Facilities (WCF)
Facilities) • For WCF sanctioned in the form of cash credit / overdraft (CC/OD), aforesaid lending institutions are
permitted to defer the recovery of interest applied in respect of all such facilities during the period from
March 1, 2020 upto May 31, 2020.
• The accumulated accrued interest shall be recovered immediately after the completion of this period.
50
A) Measures for Ease of Financial Stress (Contd.)
• For WCF sanctioned in the form of CC/OD, lending institutions may recalculate ‘Drawing Power’ (DP) by
reducing margins and/or by reassessing WC cycle for the borrowers.
• This relief shall be available in respect of all such changes effected upto May 31, 2020 and shall be
contingent on the lending institutions satisfying themselves that the same is necessitated due to COVID-
19’s economic fallout.
Easing of
• The aforesaid moratorium / deferment / DP recalculation is being provided specifically to enable borrowers
working capital to tide over the economic fallout from COVID-19.
financing
• Hence, it will not be treated as a concession or change in terms & conditions of loan agreements due to
financial difficulty of the borrowers and consequently, will not result in asset classification downgrade.
• The lending institutions may accordingly put in place Board approved polices for providing the above-
mentioned reliefs to all eligible borrowers, inter alia, including the objective criteria for considering reliefs
and disclose it in public domain.
IMPACT – These “Ease of Financial Stress” measures are expected to reduce slippages at banks for the near-term
quarters ending Q4-FY2020 & Q1-FY2021. However, the long-term impact of the slowdown would be more pronounced
for banks due to the impending slowdown. Banks are currently in the process of getting their Board approved polices
in place for providing the above-mentioned reliefs to all eligible borrowers
51
A) Measures for Ease of Financial Stress (Contd.)
• Large public sector banks (State Bank of India, Union Bank of India, Indian Bank and Bank of India) are
giving short term 1 year demand loan facility at very affordable rates of 7-8%; the amount is either
10% of existing working capital limits or less than 200 Crore, which ever is lower, to any existing customer
who approaches them for money
• Most of the manufacturing firms are availing the moratorium and converting to FITL facility
• Most large corporate groups have availed all available lines even at the holding company level
Easing of • In Infrastructure space, operating entities with stable case flows are not availing the moratorium;
working capital whereas, under construction entities are seeking undisbursed amounts and requesting for IDC to
financing regularize the account
• Most of the public banks have provided a relaxation on LC Margin to all their customers and moratorium to
all their existing customers whoever approaches them both retail and corporate
• Private banks have not offered such facility and also not providing any fresh limits
• Currently the moratorium provided by RBI does not extend to non-banking financial institutions, not on
non-convertible debentures or other instruments and not on securitized pool of loans with ARC; Banks are
awaiting clarity on all the three areas from the Regulator
• RBI has infused 75,000 Cr of liquidity in debt market (total target is of 1 Lakh crore) through
targeted long term repo operations; though currently its being utilized by companies with already
TLTRO facility stronger balance sheets
• NTPC, NHB and Reliance have cumulatively already tapped 16,000 Cr to refinance the existing high-cost
rupee debt
52
B) Liquidity Management Measures
RBI Announcement Impact
• This is expected to lead to reduction in

Reduction in Repo • RBI reduced repo rate by 75 basis points from lending rates by banks. SBI has already
rate 5.15% to 4.40% announced that it will pass on the entire
rate cut to its borrowers w.e.f. April 1, 2020.
Reduction in Cash • RBI reduced CRR from 4.00% to 3.00% and

• This would release primary liquidity of INR
Reserve Ration this dispensation will be available for a period of
137,000 crore across the banking system.
(CRR) one year ending on March 26, 2021.
Increasing • Comfort to the banking system by allowing

• RBI also decided to increase borrowing limits of
Borrowing limit it to avail an additional INR 1,37,000 crore
banks under MSF Rate from earlier 2% to 3%
under Marginal which will be applicable up to June 30, 2020.
of liquidity under the LAF window in times
Standing Facility of stress.
• Enhanced liquidity would enable banks to

• The aforesaid liquidity management measures
lend more to various sectors (including
Injection of liquidity will inject a total liquidity of INR 3.74 lakh crore
some vulnerable sectors which are stuck
into the financial system
because of liquidity crunch).
53
Industrial / Manufacturing

While current operations are minimal, companies are actively
planning for a smooth resumption in operations (1/2)
▪ Most companies view the current quarter as a washout, given reduced sales in April @ 10-30% of avg
▪ Further, companies consider the next 6 months as a very challenging period due to a low demand
offtake and a tough cash-flow situation. Several constraints on the firms are as follows -
▪ Customers have pushed back existing orders with no certain date of renewal
▪ Customers have also extended days of payment (up to 180 days)
Business ▪ Production is limited by significant RM/PM, manpower and logistics constraints
Outlook ▪ Plant operations have shutdown in a majority of companies except for process industries (like Steel and
other major metals) which are running at low capacity at 30-50%. Manufacturers under essential
goods continue to run, but expect considerable supply side issues over the next 4-6 months
▪ Companies with export business in some sub sectors such as key metals are weathering the current
situation better than businesses that are largely dependent on domestic sales
▪ Companies with index-linked sales price have been adversely impacted by falling indices (E.g. Aluminum)
▪ Companies are focusing on next steps to ensure smooth operations as and when production resumes
▪ Companies are actively planning on the safety of all labour (contractual, operations and staff)
once the utilization rises to 50-60%
Next Steps ▪ All measures to facilitate social distancing are being planned - such as changing the layout of
assembly section, spreading out workforce in more shifts rather than only 1 or 2 shifts, reducing
inter-shift interaction, canteen interaction, sanitization
▪ Companies are adjusting their budgets to account for reduction in sales (20% or more), with
focus on cash conservation
55
While current operations are minimal, companies are actively
planning for a smooth resumption in operations (2/2)
Availability
• Local manpower is available to support Limited production (20-30% of capacity)
• A scenario with full scale production in the near future looks very difficult due to mass migration of
contractual labour
• Companies expect the cost of labour to increase as more and more industries start ramping capacity
Compensation & Policies

• Some companies will shorty implement pay cuts or partial deferments based on income level of
Manpower employees. Top executives will be expected to take significant pay cuts. Though very few salary cuts or
lay-offs have been implemented so far.
• Many companies have contractual payments basis per metric ton of production/work/transportation. Their
payouts have proportionately reduced after low capacity utilization.
• Non-essential vendor contracts are being rescoped :
• To replace fixed cost commitments with variable cost,
• To revise and reduce scope , freeze all capex work and to reduce fees
• Companies under complete shut-down are considering usage of mandatory leaves for the staff
56
The extended supply chain is witnessing disruption with
contract annulments, delayed payments and stalled orders
Contractual Enforcement
• Companies are actively pursuing renegotiation of contracts for delivery schedules and deferred payments
and decentralizing purchase to procure from local sources as well
• Companies are reviewing and renegotiating fixed charges on all contracts
• Companies with no production have evoked force majeure for contracted supplies
Payments
Suppliers
• Staggered payments (40:40:20) being made. Payment terms increased for indirect material and services.
• Payments are being prioritized based on criticality. Extension of credit period is being sought from large
vendors
Availability
• Reduced availability of RM (due to transport issues/ stock out) is impacting production for firms running at
a high capacity
• Due to a lower end-demand, channel off-take has been low

Distribution • Many warehouses continue to remain closed
• Cash-rich companies are considering extension of credit period for distributors
57
Disruption in Logistics continue for the 3rd Week
• Companies are unable to ship new production due to a significant lockdown of transport -
• Trucks: 60-70% trucks are off roads due to driver unavailability; transportation rates have risen to
twice of usual, owing to driver unavailability and a two-way transport charge
• Import/Export
• Low utilization of shipping lines has halted a majority of shipments at the ports. It is difficult to
Logistics ascertain when shipments will reach customers due to the long queues.
• Some companies have negotiated relief of any Demurrage payable on shipments
• Rails: No major disruption yet. Most companies are trying to use rail as much as possible
• Last mile movement within city has improved though most warehouse operations remain closed
• Policies and notification are still not consistently interpreted across the chain – E.g. Curfews in states are
not allowing movement of goods cargo as mandated by policies of central and state government
• Contractual Obligations: Contracts are being reviewed and force majeure clauses are being invoked
in a many cases. Possibility of termination/renegotiation of many contracts
Others • Capex spends have been frozen or deferred

• Fixed charges being negotiated with utility companies on account of drastic reduction in consumption
• Insurance claims: Contracts being closely evaluated to ensure timely claims
58
Power

IPPs are facing enhanced operational challenges across the
value chain (1/3)
Renewables Thermal
• Renewable generators have not witnessed any

• Many state DISCOMs have asked thermal power
major impact on power offtake by DOSCOMs
generators to back down citing lower demand
Power off take • Some curtailment has been seen in Andhra
• DISCOMs are resorting to procuring power from
Pradesh and Telangana despite must-run status
Indian Energy Exchange (IEX) as prices have
notified by Ministry of New and Renewable
significantly reduced on the exchange
Resources for wind and solar power generators
• O&M is getting impacted owing to reduced

availability of manpower – some generators
• No major impact seen on O&M activities yet have deferred scheduled outages by 1-2
months or are undertaking only critical O&M
• However, with district level lock downs, access
activities
to sites and manpower availability will
O&M activities become challenging • O&M agencies are offer incentives to induce
workers to continue their services
• Problem of manpower availability is expected to
be more pronounced in North India than in South • Some generators have accommodated key
India manpower of O&M agencies in their on site
townships to ensure that critical O&M activities are
not stopped
60
value chain (2/3)
Renewables Thermal
• No major disruption in payment of salaries seen;

Payroll • No major disruption in payment of salaries seen
however, there might be some delays in payment
• Receivables are due for more than 6 months for

some generators, but not necessarily linked to
• Billings up to January 2020 are largely collected Covid-19
Collection of • Challenges expected going forward as • Some DISCOMs are seeking hair cuts from
DISCOMs collections are getting delayed. generators for settlement of invoices
receivables
from DISCOMs • Also, support from central government to • Many generators have received Force Majeure
DISCOMs in the form of loans from REC / PFC is notices from DISCOMs for delay in payments
expected to slow down from March 2020 onwards. Few DISCOMs have
also informed of deferring the fixed charges as
per PPA under force majeure
• Few small generators are facing cash flow • Cash flows of many generators were already
challenges and have availed of the 3 months RBI stretched; current situation has only worsened
Borrowings moratorium on repayment of loans it
• Larger players have made repayments till March • Many generators were already in talks with lenders
2020 and are evaluating the emerging scenario for restructuring
61
value chain (3/3)
Renewables Thermal
• Coal availability is good – most generators are
receiving coal regularly or have adequate stock
• For generators without railway sidings,
Coal availability
transportation through road and availability of
and ash • NA
manpower for unloading is becoming a challenge
utilization
• Ash utilization has reduced drastically owing to low
/ no ash demand from cement / road industry. Also
there are logistics problems for ash bulkers
• Most under construction / development projects

expected to be delayed by 3-6 months owing to:
• Site access challenges
• Non availability of manpower
Under • Delayed supply of modules from China and
construction / Malaysia • Most under construction projects are on hold and
under • Solar generators are considering invoking the not likely to see any incremental adverse impact
development Force Majeure clauses in PPAs with SECI and due to Covid-19
projects NTPC seeking a blanket approval for 3-4 months
delay in CoD. Similar action may be required to
be taken under transmission agreements and
land agreements (if land is made available by the
government)
62
Real Estate

Construction activities have come to a grinding halt; delays
and cost escalations are expected for key input materials
• Construction operations remain shut. Large organized players have managed to retain some of their skilled
labour by making provisions for accommodation / food etc. Unorganized and smaller players have
witnessed a higher share of worker attrition
• Cross functional teams are predominantly working on value engineering & cost reduction exercises to
reduce design, supply & construction costs post normalcy. The focus has shifted on designing and planning
for unlaunched projects. Sales and other support functions have been directed towards collections from
defaulters
Operations • The impact of China lockdown and local lockdown on supply chain is expected to be significant as once
operations start, sourcing materials locally maybe more expensive for steel, marble etc.
• Developers are emerging with new schemes during the lockdown for sales of near-completed inventory by
providing price cuts. Planned launches are being postponed anywhere between 6-24 months depending on
the micro market
• While contractual obligations between developers and construction companies for large players continue,
there is a stand still on payments interse them
• Most of the organized players have outsourced construction and hence availability of labor force is not a
direct issue. Some players have deferred salaries upto 50% for executive and mid level employees
• Complete freeze on any new recruitment. In case the demand does not pick up post covid19, the sector
Manpower could witness substantial job losses
• Availability of migrant labour post normalization is not expected to be an issue as it would be difficult for
them to find jobs in their hometowns. This is expected to happen in a phased manner
64
New project launches are being delayed and rental negotiations
are expected for the commercial real estate segment
• Ratings for most of the players expected to be impacted negatively which may further increase cost
• Booking cancellations are being witnessed for just launched / recently launched projects. These could
increase especially in the affordable housing space as people turn to conserving cash. Individuals /
investors with liquidity are trying to renegotiate their prices with developers by offering upfront cash
payments at 20-30% lower than market prices
Business
• Many developers are focusing on investing and developing digital capability for its sales team to ensure
Outlook disruption is minimized in the long run. There are online schemes, however there is limited traction
• For commercial real estate, lessees are renegotiating lease payments especially in retail setups like malls.
They expect lower footfalls for at least 6 – 9 months post lockdown. No significant impact currently on office
lease space
• Commercial space is also expected to have increased “sale and lease back” transactions to free up cash
• Large developers have ~60 to ~90 days of cash balance. This can be stretched to maximum 120 days by
prioritizing essential payments. Smaller developers have much lower cash balances
• Limited disbursement from private banks and none from public banks for under-construction projects. The
focus on liquidity remains by collecting pre-lockdown milestone collections from customers
Cashflow • Limited re-finance opportunities. Existing in process deals have been called off on valuation concerns
• Developers’ primary focus remains on conserving cash. Sales and other support functions have been
directed towards collections from defaulters
• As banks have slowed down disbursements for home loans, liquidity can be a challenge for under
construction projects with high leverage
65
Players are banking on relief from the Govt and Banks to be
able to restart operations post lock down
• Most real estate players have already approached RERA for relaxation of penalty clauses due to delay in
delivery dates. While RERA hasn’t issued an official notification yet, the developer lobby expects this to be
received soon
• Most State Governments have approved an extension of the delivery date under RERA by 3 months.
Developers have made a plea for this to be extended to 6 months
Key demands from the sector include
Regulatory • Re-structuring of project loans & last mile funding for stalled projects
demands • Extension of project deadlines under RERA
• Deferment of home loan requirements for buyers
• Moratorium on loan amounts taken for ongoing projects for a period of 2 -5 years
• Reduction in GST and salaries paid to be set off against GST
• Deferring near term payments of interest and principal without being classified as a NPA
• Last mile funding and additional lines of credit
66
Roads

Traffic has reduced to 40%; Toll collections were suspended
till 14 April and the extension notification is expected till 3 May
• Traffic reduced to 40% of usual levels in almost all toll roads. Post full lockdown, traffic has reduced to ~10-
15% of the usual levels. In major city entry points such as for cities like Delhi, Bangalore and Mumbai, the
fall has been steeper than open highways
Traffic Flow
• Major decline in city traffic during the lockdown. Average traffic congestion in Mumbai and Delhi has
dropped from an average of 70-80% during peak time to less than 5% during first week of lockdown (Week
of 23rd March)
• Suspended till lockdown period (14 April 2020). However, fresh letter is awaited for suspension due to the
recent extension in lockdown till 3 May 2020
• For the month of March 2020, the decline in toll collections is estimated to be more than 40%. These figures
Toll collections may get revised due to extension of lockdown. Annuity receipts from NHAI and States have been collected
and annuity for March 2020. However, delays are expected in the receiving annuities from the state govt. authorities
receipts • The revenue loss for NHAI-operated toll plazas is estimated at over ₹800 crore, while the compensation to
BOT Concessionaires under force majeure (political) event is estimated at ₹1,000 crore taking the total loss
to ₹1,800 crore. If goods traffic (both inter-and intra-state) allowed to ply from 20 April 2020 onwards, this loss
could reduce to ₹1,100 crore
68
All construction activity has been halted; labour on stranded
project sites are being supported by large companies
O&M and • All activities are suspended except medical, security / route patrol, plant watering, etc. in case of
overlay constructed roads. In case of major maintenance, all activities are shut
activities • Lockdown norms have been relaxed and maintenance work is expected to start in notified districts
• There is no activity in road construction and all on-going projects are shut
Under
construction • However, NHAI is looking to resume 50-60% of high-ticket projects where workers are stationed on the
project site between 14 April and 21 April 2020. NHAI is awaiting lockdown relaxation guidelines from local
projects
administrations
• Unskilled workers are usually sub-contracted and paid on a daily attendance basis. Large companies are
supporting their contractors to ensure food-supply and salaries to the workers who are stranded on project
sites
Labor Situation • 50-60% workers are available at large project sites. Most of the migrant workers are still at the labor camps
at some highway projects because they could not move out when the lockdown was announced
• Many of the projects in rural areas have locally sourced their unskilled workers, hence have not witnessed
any demobilization yet
69
Players are expecting support from the Government and expect
NHAI to bear the loss of revenue from toll collection suspension
• Concessionaires are expecting support from government as lenders are raising concerns over how Covid-19
will impact financials of companies and consequently affect repayment
• Companies have been able to manage cash by holding on to existing cash balance and reducing
Borrowings disbursement of available cash. But if construction and maintenance activities do not commence by mid-
May, companies would have to start utilizing their reserves or take support from lenders
• Companies with low DSRA buffer are expected to avail the moratorium granted by RBI
• In case of projects on Build-Operate-Transfer (BOT) mode and tolling operation, concessionaires expect that
NHAI should bear the loss of revenue since stopping of toll operations has come as a result of an order from
Direction from the Ministry of Home Affairs, making it a political event under the Force Majeure clause
authorities
• Under Force Majeure (political) event, 100% of O&M and interest costs are reimbursed for the affected
(NHAI)
period. This would cover around 50-55% of loss of revenue incurred by these projects in this period. Clarity is
awaited from NHAI
70
Disclaimer
1. These insights are based on limited no of conversations with companies in the respective sectors
2. Companies are advised to exercise their diligence while applying these practices to their industry or company
3. As the situation on the ground is very dynamic, some of the facts may have changed by now
4. The views expressed in this document should not be considered as a recommendation by A&M
71
Alvarez & Marsal Holdings, LLC. All rights reserved. ALVAREZ & MARSAL®,
® and A&M® are trademarks of Alvarez & Marsal Holdings, LLC.
© Copyright 2020

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View from the ground – Impact of COVID-19

April 18, 2020

A&M India Point of View

CONFIDENTIAL – NOT FOR DISTRIBUTION

A&M Playbook – Manage Crisis, Win the

Logistics 05 Healthcare Delivery – Hospitals 36

Aviation 10 NBFCs and HFCs 40

FMCG 18 Industrials / Manufacturing 54

Food Service 23 Power 59

Hospitality 27 Real estate 63

CONFIDENTIAL – NOT FOR DISTRIBUTION

Next 4-6 months – Plan now to win later

• Consider raising interim financing through equity or priority debt

Medium to long term – Restructure/sell

CONFIDENTIAL – NOT FOR DISTRIBUTION

Primary TPT Retail Outlet

• Exports down 34.57% (YoY); Imports down 28.72% (YoY)

CONFIDENTIAL – NOT FOR DISTRIBUTION

CONFIDENTIAL – NOT FOR DISTRIBUTION

Online/ delivery model shift

Salaries and employee related measures

Rent delays and letters to landlords

Communication with authorities

CONFIDENTIAL – NOT FOR DISTRIBUTION

Inputs Contract Modern trade Retail outlet / Organized

Short shelf life products directly to retailer

1 Procurement & Contract Manufacturing 2 Regulatory, Labor and Portfolio Changes

3 Supply Chain 4 Distribution, Store Mix & Last Mile

Regulatory hurdles easing Production for products like

• Distributors worst affected among partners owing to lack of feet-on-street

CONFIDENTIAL – NOT FOR DISTRIBUTION

Cash conservations efforts

CONFIDENTIAL – NOT FOR DISTRIBUTION

• Singular focus on expense management and cost reduction

• Downsizing and cost cutting is a consistent theme across all hotels

CONFIDENTIAL – NOT FOR DISTRIBUTION

• Overall, sales outlook is that it would be 15-30% lower in the Q1 quarter

CONFIDENTIAL – NOT FOR DISTRIBUTION

CONFIDENTIAL – NOT FOR DISTRIBUTION

• Focus is on digital through tele-consultation and health apps.

• COVID consumables like PPE, hand rubs,

• Outsource Manpower basis reduction in operational area, count is reduced by shift

• All non COVID related Capex has been deferred

CONFIDENTIAL – NOT FOR DISTRIBUTION

• Fresh disbursement have been paused

• Adopting a conservative approach to underwriting factoring in impact of COVID 19 on businesses

• Key areas of digital intervention

CONFIDENTIAL – NOT FOR DISTRIBUTION

This is being considered to prevent companies from being

Moratorium on Term Loans (TL)

RBI Announcement Impact

• This is expected to lead to reduction in

Reduction in Cash • RBI reduced CRR from 4.00% to 3.00% and

Increasing • Comfort to the banking system by allowing

• Enhanced liquidity would enable banks to

CONFIDENTIAL – NOT FOR DISTRIBUTION

Compensation & Policies

• Due to a lower end-demand, channel off-take has been low

Others • Capex spends have been frozen or deferred

CONFIDENTIAL – NOT FOR DISTRIBUTION

• Renewable generators have not witnessed any

• O&M is getting impacted owing to reduced

• No major disruption in payment of salaries seen;