oppn parties Companies Reduce Debt, Shrink Investments And Conserve Cash In These Uncertain Times
OPINIONS : Strongly Expressed

January 29, 2023

People Are Talking About

Welcoming 2023

News Snippets

  • RBI governor Shaktikanta Das says that inflation is easing and the current account deficit is manageable
  • Adani Enterprises FPO sees just 1% subscription on the first day as the stock goes down to Rs 2762, much below the price band of Rs 3112-3276
  • Stocks bleed on Friday post the Hindenburg report as Adani stocks are hammered: Sensex loses 874 points to 59330 and Nifty 287 points to 17604
  • Rs 263cr TDS scam detected by the I-T department. A mid-level officer was the kingpin and had amassed huge wealth
  • Women's U-19 World Cup -India reaches the final by beating New Zealand by 8 wickets
  • New Zealand beat India by 21 runs in the first T20 as spinners choke Indian batters
  • Sania Mirza and Rohan Bopanna lose in the Australian Open finals
  • Sania Mirza and Rohan Bopanna lose in the final of the Australian Open
  • India to play New Zealand in the first T20 of the three-match series in Ranchi today
  • RBI has proposed special purpose vehicles (SPEs) mechanism to sell bad loans to interested investors via securitization
  • JD(U) decides not to attend the Bharat Jodo Yatra finale in Srinagar
  • Hindenburg defends its report on the Adani group, dares Gautam Adani to sue it in the US
  • BJP's talks with Tipra Motha in Tripura make no headway but the party is confident of winning in the ensuing elections
  • Pathan is a super hit at the box office: Rs 57cr in India (worldwide Rs 106cr) on Day 1 and then Rs 70cr on Day 2 which was Republic Day holiday
  • Centre tells Delhi HC that Covid vaccines can't be mixed when taking the second dose
A Mirage2000 and A Sukhoi 30 of the Indian Air Force on a training mission crashed separately, in Bharatpur in Rajasthan and Morena in Madhya Pradesh, killing one pilot
oppn parties
Companies Reduce Debt, Shrink Investments And Conserve Cash In These Uncertain Times

By Ashwini Agarwal
First publised on 2021-06-09 14:15:24

When times are tough and uncertain and business is bad over a longish period, cost saving becomes a prime focus area for companies. Companies begin put investments on hold or even pull back, reduce the interest burden by repaying loans and look for cheaper finance by hitting the capital market. An SBI research report shows that the Covid crisis in the economy has made many large borrowers across several industries repay their loans and reduce the debt burden to cut costs. The report says that more than 1000 listed entities across 15 sectors have reduced their debt by a staggering Rs 1.7 lakh crore in 2020-21. As a corollary to this, these 1000 companies have shown cash and bank balance which is 35% higher in March 2021 compared to last year.

The repayment of loan by corporate entities has resulted in a massive slowdown in credit growth in 2020-21. It also means that although banks are flush with funds, there are no takers as companies are following a conservative approach in these uncertain times by putting off investment in expansion or starting new projects. SBI chairman Dinesh Khara has said that corporate have turned risk-averse.

But do companies have a choice? The economy is showing no signs of any substantial recovery. Although the second wave has receded, there is talk of the third wave hitting sooner or later. The country is still not sure how fast and how soon it will be able to fully vaccinate at least 60-65 percent of its population. People have lost jobs and are still losing them. Others are facing cuts in salary. They do not have money in their hands. Demand is unlikely to pick up anytime soon. The government has not heeded to requests of making huge investments in infrastructure projects to kick-start the economy. The scenario is pregnant with negativity. Hence, the companies reducing debts and putting investments on hold have taken a wise decision. It is better to let the bad times pass and be well prepared to take advantage of an upswing, as and when it happens.