PART – A:

 Name: Nikhil M H
 USN: 4JZ18MBA38
 Subject: Corporate Valuation
 Subject Code: 18MBAFM406
 Title of Assignment: Financial Implications of Lockdown on Business
 Date of Issue: 04 – 04 – 2020
 Date of Submission: 14 – 04 – 2020

PART – B:

I. Preamble:
India and the whole world is suffering off very serious disorder called CORONA
VIRUS which is named as COVID-19. This is caused by a deadliest virus called
Corona. This was firstly found in the Wuhan City of China. Till now there is no
antibiotic developed by any nations. It is spreading rapidly and taking the breaths of
thousands of people each day. As of now there are more than 20.00.000 lakh positive
cases with the deaths of more than 1.00.000 people all over the world.
To control this deadliest decease central government and health organizations are
working very hard. It need n number of pharmacists, doctors, drugs, etc. But there is
shortage of all those requirements in the country.
In India to have control over the spread of this decease Prime Minister of the country
Honorable Sri Narendra Modi Ji put the whole country in to the lack down for 21 days
with effect from 25th march to 14th April. but also we are not capable to break down
the chain of Positive cases.
Because of the lockdown many company shut their operations down, some of them
had chosen work from home, some of them are active partially. It had effected all the
sectors of the country very badly and the country is facing the loss heavily day by
day. As per the estimation India had already loss of 52 lakh crores of rupees because
of this outbreak.
 All Schools, Colleges, Offices, Institutions, Industries, Retail Outlets, Etc. put into the
lockdown. To overcome this situation government and RBI taking remedial actions.
And announcing special packages.

II. Financial Implications of Lockdown on Business:

1. India has been locked since march 25th of this year because of NOVEL
CORONAVIRUS outbreak. This situation has expected to impact on earnings of
the companies not only for the new financial year but also extends its effects on
next coming financial years, according to Nomura’s Saion Mukherjee.
He has stated that that the effects of lockdown would continue for at least next
few quarters and it will lead to fall down of earnings to FY 21. But it may be
continuing to the FY 22 also as it’s difficult to state how the year goes on.
Central bank cut the repo rate to its lowest since 2004 and announced that they
will boost the economy by injecting more than 3 lakh crores in to the economy. It
also provided three-month relief for all types of loan and working capital.

2. CORONA VIRUS cases are rising day by day in India, and it is already in second
stage of virus spread. It leads to complete shutdown of all economic activities
except some necessities. The government has stated that the corona virus has
become the reason for economic slowdown. As a result, it has already wiped out
Rs 52 lakh crore worth of equity investors wealth. Benchmarks of stock market
like SENSEX and NIFTY has witnessed multi-years’ lows after falling more than
35% from their January peaks.
In this time many companies shut down their operation throughout the nation.
They are Hindustan Unilever, ITC, Dabur India, India Cements, BHEL, M&M,
Castrol, Hero MotoCorp, etc.

3. RBI steps to help mitigate impact of coronavirus lockdown on Industry.

RBI governor Shaktikanta Das predicted a big global recession and said India will
not be immune. It all depends how India responds to the situation, he said. Global
slowdown could make things difficult for India too, despite some help from
falling crude prices, Das said, adding food prices may soften even further on
record crop production.
 It reduced the cash reserve ratio maintained by the banks for the first time in over
seven years. CRR for all banks was cut by 100 basis points to release Rs 1.37 lakh
crore across the banking system.
RBI has announced come a day after the government unveiled a Rs 1.7 lakh crore
package of free food grains and cash doles to the poor to deal with the economic
impact of the unprecedented 21-day nationwide lockdown.
The aftershock of sudden lockdown is visible.
For one, people rushed into provision stores, making a mockery of 'social
distancing' which is the primary goal of it. Secondly, a day after the lockdown,
online suppliers of grocery, medicine and food, like Amazon, Flipkart, Bigbasket,
SuprDaily and many others, suspended their services across the country, citing
"confusion" or "restrictions imposed by local authorities" on their movements.
Others, like Grofers and FreshToHome, complained of official obstructions.
Online milk supplier Milkbasket shut down its service of supplying milk because
they could not able to deliver the milk to the public. Which results of dumping of
15000 liters of milk and throwing 10000 kg of fruits and vegetables.

4. Pronab Sen says, "At the moment, it is a supply-side problem. Both production
and distribution of non-essentials have come to a halt. This affects at least 55% of
the economy for three weeks or about Rs 2 lakh crore. It may even be larger due
to previous partial lockdowns by various state governments.
Lockdown would seriously impact on GDP;
Sen says, "In FY20, we would be lucky if the growth rate is 3.5% (full fiscal). It
would be a very different scenario for FY21. In the first half, we would be lucky if
the growth rate is zero. In the second half, the growth could revive by as much as
7%, taking the average growth for the year to 3.5%."
Rangarajan is more optimistic. He says, "The growth rate in FY20 may decline by
0.5% (from 5% that the NSO's first advance estimate says). In Q1 of FY21, the
growth rate will be negative. I don't know what would happen in Q2 and Q3 but
my best estimate for the entire fiscal would be 4%."

5. Amid coronavirus lockdown, gold finance companies may be less impacted

At a time when the country is reeling from the impact of the global outbreak of
coronavirus (Covid-19), non-banking financial company (NBFC) stocks were
 among the worst hit. Their performance is expected to be hit due to stress across
sectors. While these concerns are justified, gold finance companies —
Manappuram Finance and Muthoot Finance — may be less impacted.
“The safety of money is most important in the current situation, when the degree
of impact of Covid-19 is very difficult to ascertain. Nobody is able to estimate
how long it will last. I think, gold finance companies are a better and safer choice
among NBFCs,” says Deepak Jasani, head of research-retail, HDFC Securities.
While gold loans account for 67 per cent of Manappuram’s consolidated loan
book as of December 2019, it is 87 per cent in the case of Muthoot. This, along
with 60-68 per cent loan-to-value (LTV; loan as a percentage of collateral value)
ratio, the recovery rate, even in the case of default and some correction in gold
prices, should be good.

6. Prime Minister Narendra Modi in a televised and said people should not get out of
their house for three weeks after the order went into effect hours later at midnight.
He also announced that $2 billion would be provided to strengthen India’s medical
infrastructure and treat patients infected by the virus. 
The impact of the lockdown on India’s informal sector, which includes many
street vendors as well as taxi and auto drivers, will be huge, Kunal Kundu, India
economist at Societe Generale, told CNBC. 

“When we talk of aggregate demand, what is important to realize is that 65% to

70% of India’s economy is unorganized,” he said. “Those are the people who
would definitely be more affected, (and) even the small-and-medium enterprises.” 
“When we talk of aggregate demand, what is important to realize is that 65% to
70% of India’s economy is unorganized,” he said. “Those are the people who
would definitely be more affected, (and) even the small-and-medium enterprises.” 

7. In recent weeks, we have seen the significant economic impact of the coronavirus
on financial markets and vulnerable industries such as manufacturing, tourism,
hospitality and travel. Travel and tourism account for 10% of the global GDP and
50 million jobs are at risk worldwide. Global tourism, travel and hospitality
companies closing down affects SMEs globally. This, in turn, affects many
people, typically the least well-paid and those self-employed or working in
 informal environments in the gig economy or in part-time work with zero-hours
contracts. Some governments have announced economic measures to safeguard
jobs, guarantee wages and support the self-employed, but there is a lack of clarity
in many countries about how these measures will be implemented and how people
will manage a loss of income in the short-term.

8. In the scenario where the potential economic loss in India would vary by sector,
with current-quarter output drops that are large in sectors such as aviation and
lower in sectors such as IT-enabled services and pharmaceuticals. Current-quarter
consumption could drop by more than 30 percent in discretionary categories, such
as clothing and furnishings, and by up to 10 percent in areas such as food and
utilities. Strained debt- service-coverage ratios would be anticipated in the travel,
transport, and logistics; textiles; power; and hotel and entertainment sectors.

9. The 21-day lockdown across the country is set to hit non-banking financial
companies (NBFCs) hard as small business owners and low-income households
find it hard to service their loans. NBFC loans in the affordable housing, small and
 medium enterprises (SMEs), loan against property (LAP), real estate and
microfinance (MFI) segments are likely to be affected the most, rating agency Icra
said on Thursday.

10. The economic impact of the 2019–20 coronavirus pandemic in India has been

hugely disruptive. The Indian economy is expected to lose
over ₹32,000 crores (US$4.5 billion) every day during the 21-day-
lockdown which was declared following the coronavirus outbreak. Up to 53% of
businesses in the country will be affected. Supply chains have been put under
stress with the lockdown restrictions in place; initially there was a lack of clarity
in streamlining what is an "essential" and what isn't. Those in informal sectors and
daily wage groups are the most at risk. A large number of farmers around the
country who grow perishables are also facing uncertainty Various businesses such
as hotels and airlines are cutting salaries and laying off employees. The live events
industry has seen an estimated loss of ₹3,000 crores (US$420 million).
In the third week of March, Amazon and Walmart-owned Flipkart announced that
it would stop sale of non-essential items in India so that it could focus on essential
deliveries. Other fast-moving consumer goods companies in the country have
significantly reduced operations and are focusing on essentials. Major companies
in India such as Larsen and Toubro, Bharat Forge, UltraTech Cement, Grasim
Industries, Aditya Birla Group, Tata Motors and Thermax have temporarily
suspended or significantly reduced operations. iPhone producing companies in
India have also suspended a majority of operations. Young startups have been
impacted as funding has fallen. Stock markets in India posted their worst loses in
history on 23 March 2020. However, on 25 March, one day after a complete 21-
day lockdown was announced by the Prime Minister, SENSEX and NIFTY posted
their biggest gains in 11 years, adding a value of ₹4.7 lakh crore (US$66 billion)
crore to investor wealth.

III. Summary of Observation, Comments and Conclusion

The world has seen many deceases till now. And the CORONA VIRUS is one among
them. Its birth place is Wuhan city of china. Whole world is suffering of this decease.
 Many people are losing their lives for no reasons. Whole world is opposing china on
this incident that they have created the Virus to do biological war against the enemy
countries. But it looks the virus has its own plan of actions that it spread all over the
world more than 200 nations. Scientists are in busy with finding out vaccination for
the virus. But they are lagging behind. At another side CORONA continues its cruel
act of taking lives and breathes of people.
This will be an unforgettable incident of 21st century. We need to breakdown the
chain of spread of virus by staying in home, keeping social distance and maintain
hygiene in our surrounding atmosphere.

***#stayhome#staysafe#***

References

1. https://www.bloombergquint.com/coronavirus-outbreak/lockdown-may-impact-
earnings-in-fy22-too-says-nomuras-saion-mukherjee
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play-out-for-economy-markets-4-scenarios/articleshow/74804087.cms?from=mdr
3. https://economictimes.indiatimes.com/news/economy/policy/rbi-steps-to-help-
mitigate-impact-of-coronavirus-lockdown-on-biz-
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set-to-hit-nbfcs-hard-icra/1910549/
10. https://en.wikipedia.org/wiki/Economic_impact_of_the_2019%E2%80%9320_corona
virus_pandemic_in_India