With several industries in China on a standstill due to coronavirus outbreak, the Confederation of Indian Industry (CII) said that the revenue of Indian companies operating in China are likely to fall by 15-20 per cent in the first two quarters of 2020 and may revive only in the third quarter.
An assessment report by the industry body said that extended holidays have reduced productivity which has a direct impact on revenues and growth. Businesses have been closed since January 24, 2020 and are expected to resume operations only by February 20, which is not certain, it added.
“Overall, companies foresee a dip in revenue by 15-20% in Q1 and Q2 over previous year. It is expected that businesses will get normalised only by Q3,” it said.
As per the report, the companies are yet incur the fixed costs including wages, office rent, statutory overheads and interest especially for manufacturing companies despite nil operations.
Loss of revenue for months of February and March 2020 is expected to result in cash crunch as fixed costs need to be borne without any sales or only part sales, it said.
“Unexpected costs have gone up to cater to the safety and wellbeing of employees returning to work, like providing facemasks (3 times a day), office quarantine (3 times a day), transport for pickup/drop and hand sanitizers. In some cases, companies have had to procure laptops and arrange work from home or 14 days accommodation for people returning to the cities in lieu of the restrictions imposed by local communities on people coming from other cities.”
Titled ‘Novel Coronavirus in China: An Impact Analysis’, the report observed that input costs may be affected due to shortages in supply and cost of freight may also go up which will have a direct impact on companies’ revenues and profitability in the short run.