9,826.15245.85
Stock Analysis, IPO, Mutual Funds, Bonds & More

COVID-19 impact: Near-term cash flow stress expected in construction sector, says Icra

Recent developments witnessed labourers migrating to their home towns, thus impacting construction activities. Disruption in the second-half of March 2020 will result in modest revenue growth/de-growth in Q4-FY2020, it said, adding the major impact is expected in Q1-FY2021 with construction activities stalled during the first half of April-2020.

PTI|
Last Updated: Mar 31, 2020, 08.17 PM IST
0Comments
PTI
labourers-pti
Coronavirus

COVID-19 CASES

Confirmed
190,535
Deaths
5,394
New Delhi: Significant near-term cash flow stress is expected in the construction sector due to Covid-19 impact, rating agency Icra said on Tuesday. It said that the companies which are into high capital-intensive segments like mining, etc and those undertaking overseas ventures will see higher pressure if their projects get stalled.

"The Covid-19 (novel coronavirus) pandemic impact has led to the stalling of activity and this disruption will have a negative impact on the operating income, profitability, and liquidity position of construction companies in the short term. While timely measures from the Government and lenders can help provide the liquidity to cash-starved entities, performance of the companies can come under pressure in the near term," Icra said in a statement.

Shubham Jain, Senior Vice President and Group Head, Icra said, "Even before the complete lockdown was implemented in the country for preventing the spread of Covid-19, some states had started putting restrictions in place. Some of the states have also announced relief packages to provide financial support to day labourers and construction workers".

Recent developments witnessed labourers migrating to their home towns, thus impacting construction activities, he said.

Disruption in the second-half of March 2020 will result in modest revenue growth/de-growth in Q4-FY2020, it said, adding the major impact is expected in Q1-FY2021 with construction activities stalled during the first half of April-2020.

"Even if the lockdown is not extended, increased risk aversion could result in labour shortage in the first quarter as the return of the migrant labourers will be gradual. Further, as mining activities and manufacturing plants have also shut down, raw material availability could also emerge a constraint," the statement said.

Most construction contracts contain force majeure clauses which will entitle the contractors an extension of timeline (EOT) in the project completion schedule, it added.

Nevertheless, the idling of machines, manpower, and other fixed costs will impact the profitability and liquidity of contractors in Q4-FY2020 and Q1-FY2021, Icra said. NAM NAM BAL BAL
(Catch all the Business News, Breaking News Events and Latest News Updates on The Economic Times.)

Also Read

Open for Covid and non-Covid diseases: 'Doctors without borders'

Covid-19 in numbers

Can airlines weather the Covid storm?

Covid kills demand for Hilsa fish

Telcos reward their own Covid warriors

Comments
Add Your Comments
Commenting feature is disabled in your country/region.

Other useful Links


Copyright © 2020 Bennett, Coleman & Co. Ltd. All rights reserved. For reprint rights: Times Syndication Service