oppn parties Companies Reduce Debt, Shrink Investments And Conserve Cash In These Uncertain Times

News Snippets

  • Karnataka HC has ruled that a harassment complaint lodged by a wife after receiving a divorce notice from the husband loses its weight in the eye of the law and quashed the FIR filed by a women against her husband and in-laws
  • 35 people killed in renewed violence in Manipur, 30 of them militants
  • Manipur boils on the eve of Home minister Amit Shah's visit as militants strike, vandalize MLAs home and loot armouries
  • Kerala chief minister P Vijayan says Centre's decision to cut the borrowing limit of the state is 'sadistic' and shows its negative mentality towards the state's development
  • Rahul Gandhi recieves passport, set to travel to the US
  • Centre said that the march-to-Parliament by wrestlers was a 'deliberate provocation'
  • Prime Minister Modi inaugurates the new Parliament building, calls it 'cradle of empowerment'
  • Mamata Banerjee will most likely attend the opposition meet called by Nitish Kumar in Patna
  • With container prices, which were on fire, crashing by 40% YoY, importers and exporters in India heaved a sigh of relief as the burden of high freight costs will reduce
  • In an aim to push lenders to manage risks better after the US financial crisis, the RBI has reviewed bond value norms
  • 14 countries under the Indo-Pacific Economic Framework (IPEF), including India, entered into an agreement to boost supply chains and counter China
  • Malaysia Cup badminton- H S Prannoy wins the title beating Weng Hong Yang of China 21-19,13-21, 21-18
  • Yashasvi Jaiswal replaces Ruturaj gaikwad as stand-by opener for the WTC final
  • IPL final washed out due to rain, rescheduled for today, the reserve day
  • In a shameful incident, Delhi Police manhandled international wrestlers when they sought to march peacefully to the new Parliament building to highlight their greivances, detained some top wrestlers
Fifth IPL title for Chennai as Ravindra Jadeja hits 10 off last two balls to spoil the party for Gujarat Titans
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.