COVID-19 IMPACTBusiness Leaders’ view on impact of COVID-19 on economy as well as their business

Shankar K | shankar@feedbackconsulting.com

Feedback carried out a short survey among business leaders & opinion makers to gather views and opinion about impact of COVID-19

Carried out in the month of April 2020.Web-based survey

146 business leaders participated in this exercise

Auto, Agri, BFSI, Chemicals, Energy, Pharma, Healthcare, Education, Construction, Gen. Engg., IT, Prof. Services, Trade Assn., etc.

Extent of impact of COVID-19 on global economy

3 big resets that business world will see

Changes foreseen in way business will be conducted

Impact of COVID-19 on Indian economy

Time-frame for Indian economy to recover

Sectors most impacted vs. recover faster

How firms are addressing COVID-19 outbreak

Organizations top priority today in the backdrop of COVID-19

Reduction foreseen in business booking due to COVID-19 outbreak

Biggest concerns that firms have today

Problems associated with customer service during this period

Plan to manage customer experience during this time period

Q. In your opinion what will be the extent of impact of COVID-19 pandemic on Global economy?

Current situation shrouded with uncertainty making it difficult to access impact; however majority view is that it will lead to significant de-growth in global economy

35%

Not able to access impact due to extent of

uncertainty

Foresee a significant de-

growth across the globeSlowdown till lockdown

is in effect and rapid recovery post that

Drop-in GDP growth rate by 1 – 2%

Others• Depends on Govt. Stimulus / Policies• Global Markets will rebound however

most industries will bear losses in the short to mid term

33%

13%

17%

2%

N=1

46§ Mixed view among Agri

firms; however they are hopeful of rapid recovery post lockdown

§ Manufacturing most worried about uncertainty while services firm foresee significant de-growth

Agriculture Manufacturing Services

Not able to access impact due to extent of uncertainty 33% 40% 28%

Foresee significant de-growth 28% 26% 49%

Slowdown till lockdown and rapid recovery post that 22% 13% 18%

Drop in GDP growth by 1 – 2% 12% 20% 3%

Q. What do you think will be the 3 big resets that the world of business will see as a result of COVID-19?

Digital / Tech adoption, EHS focus, Remote working and De-globalization called as big resets as a result of the current pandemic

N=1

46

46%

44%40%

28%

EHS Focus 17%

BCP / Remote working29%

Accelerated Digital Adoption / Transformation23%

Financial re-structuring9%

Lean focus9%

Virtual meets replacing travel12%

De-risking (Concentration risks)19%

De-globalization18%

Supply-chain rejig 8%

Consolidations4%

Geo-Political realignment

7%

Climate change focus

3%

§ With no vaccine in sight; business leaders see significant shifts in way business will be conducted in post COVID era

Q. What changes do you foresee in the business world due to impact of COVID-19?

Global supply chains, faster adoption of digital and disruption in certain sectors seen as the key changes

N=1

46

Work from home / remote working

will become a

norm

Digital / Tech.

adoption will

increase at a faster pace

Disruptions expected in certain

businesses in the short to medium

term

Localization will gain

more prominent than ever

before

Firms insuring against

Pandemic / Epidemic

will increase

Global supply

chains will undergo a realignme

nt Others

59%

84%77%

66%

44%

84%

6%

Select views:

“Decline of share of Oil in World primary energy consumption”

“More disaster management preparedness”

“New business models will emerge. Contracts will get re-written. Movement will be from Business Defense to Strategic offense. There will be hit in short term but rise in long term.”

“Relook at the entire supply chain with global distribution - not just localization”

“Do not foresee any change. Life will again get back to normal.”

§ Pandemics coupled with volatile global trade environment is seen to fuel localization focus

Q. What according to you will the impact of COVID-19 on Indian economy considering the steps that government has initiated to contain the spread of the epidemic?

1 in 3 business leaders believe that India recovery will be better than world economy

N=1

46

Not much clarity at this stage; too

early to do an assessment

Impact will be severe than anticipated

and with uncertainty on revival period

Both impact and recovery will be

better than world economy

Will have to wait and watch on

further measures by government for

industry and commerce to

comment on the impact

Others

17% 16% 30%5%

33%

Select views:

“Negative impact could well be relatively muted in India as compared to developed countries. India could actually see a more positive scenario given markets are already undervalued and base of consumption is still low....however govt policy will need to gets its act together for this to happen.”

“Can’t say at this stage but MSME industry will be severely hit”

“The Indian economy was already a mess and directionless before the pandemic. The government was in denial and will blame this pandemic for slow down”

“India will recover faster, if the spread is controlled. There is a possibility that it becomes a viable alternative to China as a manufacturing hub.”

§ Though there is a general sense of optimism; business leaders have been critical of the efforts undertaken by the government to revive / safeguard the economy

Q. According to you how long will it take for the Indian economy to recover?

Recovery period is largely spread out with no majoritarian view

N=1

46

AT LEAST 2 QUARTERS

6 – 9 MONTHS

9 – 12 MONTHS

MORE THAN A YEAR

OTH

ERS

25%

29%

17%

29%

1%“It depends on the way the disease progresses & the control the Govt is able to get hold of. If there are secondary & tertiary attacks leading to repeated short-term lockdowns - impact will be enormous”“It would only recover moderately in 1 year”

§ Mixed view among sectors; high uncertainly leading to lack of clarity on the recovery timeline

Q. Which sectors according to you will get impacted the most and the ones which will recover faster?

Travel, Hospitality, Tourism, Auto and Construction swill bear the maximum impact while Logistics, Agri, Education, E-Com, IT and FMCG to recover faster

N=1

46

Travel

Tourism

Auto

Hospitality

Construction & Real Estate

Manufacturing

MSME

Infrastructure

Retail

Professional Services

Logistics & Supply Chain

Oil & Gas

Mining

Power / Energy

Agriculture

Education

Metals

E-Commerce

IT Services

FMCG

Textile

11%81%81%80%

71%63%

36%34%

28%26%

22%19%19%

13%11%10%10%10%

9%8%7%7%

9%13%12%

17%24%

8%20%

29%16%

43%13%

4%23%

38%36%

6%50%

46%44%

11%

§ Retail, Infrastructure and Manufacturing are other sectors which may recover faster compared to most other sectors

§ Muted opinion on MSME segment recovery

Q. How is your organization preparing to address the impact of coronavirus outbreak?

Re-calibrating growth called out as a key focus followed by managing work-flows / ensuring BCP

N=1

46

Relooking at the growth outlook for the coming

quarters

46%

33%

Business as usual3%

§ Contain cost, prepare for restart, use financial strength against competition

§ Heavily impacted on cash flow as customers use this opportunity to totally stop payments. Investments will be impacted significantly as over the past years mid size businesses have been completely ignored by the policy makers - we are the middle class :)

§ Preparing to take our whole school online and embrace tech in Edu more

Others

3%Would like to wait and watch before

we take a firm course of action

Managing work-flow

17%

§ Manufacturing firms are largely adopting the wait and watch approach until further guidelines are released by the government

Q. What according to you is the biggest pain point / concern today?

Managing cash flows and planning for uncertainty emerge as top concerns

N=1

46

Managing Cash-flow [27%]“Covid-19 Recovery may be long drawn. Demand will be significantly impacted. cash flow will be under pressure.”“Cash flow of an organization is major concern”

Uncertainty [26%]“Uncertainty that when will things get normal, and how much will be the impact. Sadly, even the businesses like IT, Healthcare, which are not as severely impacted, are showing a degrowth because their similar customers are putting things on hold, just because everybody is uncertain collectively.”“Lack of planning, and the uncertainties stemming from same. For e.g., when the lockdown ends, how is it possible to get back thousands of migrant workers to get to work in a short time? And how to address health and safety? In terms of manufacturing, how to meet the supply-demand?”“Uncertainty, asymmetric information on the pandemic”

Business Sustainability [13%]“With an increased operational cost such as setting up of BCP and lower productivity with staff working from home and on LOA, SHN, coupled with tightening of customer's budget, our business is struggling with operating cost.”“Concerned about booking orders, retention of customers, increase in overheads….”

Employee safety and well-being [12%]“Ensuring safety of stakeholders and manage projects without travelling for business meetings”“Starting operations at the same time ensuring safety of all employees”“Regaining the lost momentum and being able to motivate the people”

Supply Chain [5%]Others [18%]

Measures taken by government | Macro-economic factors | Stress on medical infrastructure, etc.

Q. What is your organization's priority today?

Employee well-being and maintaining cash reserves are of prime focus

N=1

46

1

Employee well-being

Ensuring adequate cash

flows to sustain business

2Stability of business in this volatile

period

3

Focus on customer

experience & retention

4Managing /

Building plans for business

growth

5Focus on

recalibrating business plans

for next FY

6

§ Firms are also evaluating ways and means to ensure business stability as well as be in constant touch with customers / partners

Q. According to you what is the %age reduction that you foresee in business booking / revenue in the coming financial year due to impact of COVID-19?

Firms are expecting a reduction to the tune of 15 – 18% in their business booking in the current FY

N=1

46

None < 5% 5 - 10% > 10 - 15% > 15 - 20% > 20 - 25% > 25 - 30% > 30%

2%6%

18%22% 23%

10%7%

11%

§ Most firms are less optimistic on the business bookings and believe that first two quarters of the year will have muted growth

Q. What problems do you foresee will arise to address / undertake customer service / issues / complaints for your products / services?

Firms are grappling with logistical challenges as well as maintaining uniformity; ramping up remote support with work from home was also seen challenging

N=1

46

Ramping up the back-end support to handle customer requests

Building alternate medium to interact / interface with client

Logistical challenges to deliver spares / service customers

Challenges to meet agreed SLAs

Lack of visibility on AMC/service contract renewal

Managing & Training of staff / customer facing teams remotely

Maintain consistency in service delivery

Co-ordinating with teams to ensure smooth service delivery

Others

33% 33%

52%

26% 28% 26%

40%35%

10%

@ @

“See no impact as we have tier 1 suppliers located very close to our customers”“No to limited impact”“Managing surge in customer requests once the lockdown is lifted”

Q. How do you plan to manage customer experience during this time period?

Firms are adopting the ‘Stay in touch’ approach as well as demonstrate agility to bring any change in delivery models to engage and manage customer experience

N=1

46@ @

Proactively reach out to customers to understand

their concerns / apprehensions and try to

resolve it on a case to case basis

Keeping a constant channel of communication open with

customers

Orienting customer facing teams on how to manage / service customers remotely

Use digital mediums as much as possible to address

customer queries / requirements

Others

35% 35% 22%

7% 1% “We are using different strokes for different folks. One approach will not fit all. If you understand the customer well, you will know the course of action.”

Sectoral Impact Due to COVID-19 [1/4]@ @

Sector Covid-19 Impact on the Sector Likely Recovery Trend

Power

• Indian Power sector, already stressed due to overcapacity and stagnated demand, witnessed peak demand touching 10 years low due to lockdowns

• 25-30% drop in the power demand – Peak demand lowest in more than a decade

• Sharp drop in capacity utilization levels for Gencos. Transcos have reported spare capacity

• Discoms under financial stress due to poor revenue realization from the bulk customers; entire power sector value chain is getting impacted

• Investments in network augmentation & modernization likely to be deferred by an year

• Gradual recovery of demand from Industrial & Commercial segments –preference towards work from home, social distancing, less workforce in the factories in order to maintain physical distancing

• Demand from residential segment likely to be muted due to significant impact on AC sales and timely arrival of monsoon this year

• Recovery to 90% of pre-pandemic levels expected by October 2020• Financial assistance from the Government is necessary for recovery of the

Discoms and the entire power sector value chain

Oil & Gas

• Global crude oil price touched historical low with May futures ended in negative; production cut agreements among oil majors to revive crude prices

• In India, demand for commonly used fuels like petrol & diesel have fallen by 50% - which is leading to inventory & revenue losses for OMCs

• Favorable situation for India as the country is leveraging low oil prices to top up the strategic oil reserves

• Significant investment has already been done in the downstream sector in the last few years; further investment when cash flow situation improves

• Price and demand recovery likely to be much slower than the crash• Recovery expected in phased manner – US$40 – 45 by mid-2021 and

US$70 by 2022• In India, fuel demand from industrial and commercial activities likely to

recover within next few months. • Demand from the railways & airlines segments may take a considerable

amount of time to recover

FMCG

• Supply and demand shocks for Indian FMCG industry in the past few months due to the pandemic

• Panic buying during initial weeks of March• 2020 caused sharp rise in FMCG sales which• eventually declined in the following weeks• E-commerce platforms are one of the major gainers; emergence of

innovative delivery models to cash in on the opportunity• Covid-19 pandemic may cause long lasting challenges for millions of

distributors and retailers across the country

• Recovery faster than any other sector however in phases• Essential commodities would see the fastest growth, with demand

returning to normal levels within June-July 2020• Discretionary spending may take as long as 5 - 6 months to normalize – i.e.

by Diwali 2020• Alternate channels & digital interventions are likely to be the focus of the

industry post-recovery• Availability of items at much cheaper price and convenience of ordering

may drive the customers away from traditional way of purchasing FMCGs

Sectoral Impact Due to COVID-19 [2/4]@ @

Sector Covid-19 Impact on the Sector Likely Recovery Trend

Electricals & Electronics

• As with many other sectors, this industry is also dominated with SME units. • Impact on larger firms will be mainly demand based pressures and the

market revival part of the business• SME’s would be hard hit with multiple problems of poor cashflows, low

demand and reliance on imports thereby having a shortfall in raw materials / components

• Most also have migrant labourers working for them and getting them to come back will be huge challenge

• DISCOMs being in further trouble with lower power demand will impact their payments

• Most companies feel that demand will revive in Q3 of FY 21 and till then there will be struggle to normalize

• Larger firms may start operation as soon as the lock down is removed.• Smaller firms will struggle to restart operations• Industry will go through labour shortage• The Government is already coming out with Electronic Manufacturing

incentives, we will see a greater thrust to manufacture in India now and reduce dependence on imports. But this will take 2-3 years to fructify.

• India will witness some mega projects in Electronics manufacturing being announced in the coming years.

Automotive

• 34% and 45% Drop in production and domestic sales of automobile in FY’20. Unprecedented 25% drop in Auto export

• SIAM estimates production loss of Rs. 1 Lac Crore during 42 days of lockdown. ACMA estimates Rs. 50,000 Cr. loss for Auto Component manufacturers

• As per FADA, OEM dealers could not sell Rs. 7,000 Cr worth BS4 stock due to the lockdown. This is adding stress to the financial health of the Dealers

• As many as 8-10% of the auto dealers are expected to face closure in the next 6 months due to existing inventory of BS4 and new BS6 vehicles

• Fairly long journey of recovery for the industry. 3+ years for the demand to bounce back to FY’20 volume levels

• Delay in upgrade from the existing vehicles likely to drive aftersales market

• Sense of social distancing to benefit 2W, entry level cars and used vehicle sales

• Diwali season will be critical to pull back some part of demand• Webinars, online product launches and digital auto shows may replace

the physical ones going ahead• OEMs likely to extend credit lines to dealers. Virtual showrooms may halt

the expansion of new showrooms• Likely appeal to the Government for extension in BS IV sales timelines

Sectoral Impact Due to COVID-19 [3/4]@ @

Sector Covid-19 Impact on the Sector Likely Recovery Trend

Education

• The pandemic has forced temporary closure of all educational and training institutes

• The formal education sector leveraging technology to provide a seamless & unified experience to students

• Students' plans of studying abroad have either been delayed or even cancelled

• Various forms of online trainings have seen as much as 60% increase in new registrations

• Majority of pre-schools are non-operational, some large chains are operating through online classes

• Vocational training institutes, known for offering practical knowledge and experience, are impacted the most due to lack of proper digital solutions

• ‘limited’ economic impact for the segment however, FY’21 growth likely to be lower than FY’20

• Formal education sector will have business as usual including Pre-Schools & Offline Training Centres

• Vocational training needs technology such as Virtual Reality (VR) to overcome the challenges.

• Institutes may adopt complete school/campus management solutions to enable learning from anywhere, anytime

• A Digital strategy, which used to be considered “Good-to-Have” for the education & training sector, might now end up becoming a “hygiene” factor for the sector.

Aviation

• Passenger services on both domestic & international routes have come to a complete stop – revenue impact not just for airlines, but also for airport operators

• All airlines are facing severe financial troubles - Cancellation of flights & refunds have reversed the cash flow for these companies, while large fixed costs (salaries, aircraft lease, etc.) are causing severe financial stress

• Cascading effects on tourism & hospitality industry across all major tourist destinations

• Long drawn recovery timeline as both business & leisure travelers are expected to avoid travels in the near future – possible recovery only by late 2021 or early 2022

• Airlines will resume operations with a limited number of routes – with prime focus on profitable domestic routes. Personal distancing norms would mean lower load factors and increased ticket prices

• Network expansion & aircraft procurement plans expected to be put on hold for an Indefinite period

• Major human resource challenge in terms of crew scheduling & training. High risk of downsizing in the industry if demand remains subdued for long

Sectoral Impact Due to COVID-19 [4/4]@ @

Sector Covid-19 Impact on the Sector Likely Recovery Trend

Healthcare

• Revenue of hospitals & doctors with private practice have reduced as regular check-ups, non-critical diagnosis and elective medical procedures have been postponed

• Impact also on revenue of allied services such as pharmaceutical retailer, diagnostic labs, imaging labs and physiotherapy centres

• The healthcare system continues to respond and provide care to emergency cases like acute ailments, accidents, and pregnancies

• Decrease in medical tourism which used to contribute close to US$ 3 billion dollar to the economy and from ~5 lakh patients annually

• The sector is expecting fairly quick recovery it enjoys a higher degree of trust among the public - operations might return to normal by June-July 2020

• Likely push to augment the healthcare infrastructure in the country –through increase in government spending and improving the doctor-patient ratio

• New business models & digital interventions will find more acceptance –such as mobile hospitals, telemedicine and e-prescriptions

Construction and Infra

• Probably the worst hit sector which provides employment to close to 71 MN in India. And close to 50% of these are migrant labour

• All activity across the country had stopped creating a chaos among labourcommunity, which still persists in all parts of the country

• Real estate which was going through one of its tough phase has plunged into a new low

• Cash flow in the system was affected with no clarity on NBFC moratorium, till RBI clarified recently

• The supply side of the industry like cement, steel, Equipment etc had come to a complete stand still

• Post April 20th there has been a reopening across the country for most infra projects (75% of the road projects had re-started again), but with varying degree of completeness

• PSU and other government projects which were remote in nature continued with skeletal manpower

• Demand expected to pick up in full steam only post August across sectors as the industry usually goes through a ow phase during monsoon

• It is still left to see how most sites are able to get back labour at site• This funding for this sector by the government could be a challenge post

Covid, • From reviving the economy standpoint, the government might find ways to

re-boot this sector

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