The liquidity saga

By Dinesh Arora, Partner, Deals – Corporate Finance and Investment Banking

In the initial days of the lockdown, with everything coming to a standstill, the topmost concern of Corporate India was liquidity. The Government and the RBI have done a good job of managing the liquidity crisis with moratoriums and other measures and checked the spread of panic. This has given organisations time to rationalise costs and redraw their business plans for the new normal.

Our survey indicates that the recovery is not going to be uniform across sectors and therefore, the steps taken by various corporates would differ. Many of the badly impacted sectors such as Tourism, Hospitality, Healthcare and Airlines would need to restructure and reduce debt.

Everybody seems to be waiting for the RBI restructuring package which will help things immensely. A set of companies would need to shed some excess weight in terms of underperforming and/or unrelated businesses to survive. Lightly impacted sectors may be able to get by through postponement of capex, revision of business plans and some moderated extended liquidity support. However, several companies may not be able to survive this crisis and we could see increased bankruptcies by the middle of next year.