27 organisations of the 100 listed on the NSE won’t be able to sustain the current wage bill, a study by Deloitte found.
Mumbai| At least 27 out of the top 100 corporations listed on the National Stock Exchange will not be able to maintain current wage bill if their revenue dip by 30% or more due to a national lockdown and following salary cuts, a study by Deloitte found.
Companies must evaluate their ability to pay salaries given the slowdown in general consumption across all levels, said Deloitte.
Deloitte conducted research of the top 100 corporations listed on the NSE in terms of market capitalisation.
The study by a multinational professional services network said “27 firms won’t be able to sustain current wage bill from cash profits if their revenue dips by 30% or more. In fact, the consequence will be even larger since the cash stuck in inventory and receivables is likely to increase in such a scenario.”
These firms will have to either dip into its cash balance or borrow in the short term, the study said.
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The study said 11 of the 27 vulnerable firms have a debt to equity ratio of more than 1, making it challenging to borrow to pay wages. The study did not name the companies.
A national lockdown which began from March 25 to curb the spread of the novel coronavirus has resulted in the closing of businesses and factories, halt of flights and trains and restraints on the mobility of people and goods. This has resulted in a slump in consumption, sinking revenues of many corporations.
Over 1,000 people have died due to COVID-19 in India and more than 32,000 cases have been recorded in the country so far, as per the government.
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