RBI's EMI moratorium could give Rs 2.1 trn liquidity to companies: Report

'Sectors with higher leverage will be major beneficiaries'

The Reserve Bank of India’s three-month suspension of EMIs could provide a liquidity breather of Rs 2.1 trillion if all corporate houses avail it, says a report.
 

The findings by Crisil Ratings are based on assessment of 9,300 of rated non-financial sector companies across 100 sectors.

It said sectors with higher leverage, such as power, telecom, roads, textiles and fertilisers, will be the major beneficiaries and account for nearly 47 per cent of the total breather available.

“The moratorium announced by the RBI on interest and principal obligations due between March 1 and May 31, 2020, would be tantamount to a liquidity breather of Rs 2.10 trillion if all companies opt for it,” the rating agency said in a report.

The amount was arrived at by considering total principal and interest falling due in the three-month period, it said.

While the moratorium provides substantial benefit, actual salary payments will depend on liquidity available on the day of the payout, it said.
 

Information technology consulting firms and automobile makers have low leverage and will gain relatively less from the moratorium, the report said.
 

But they typically maintain high liquidity, which can be used to pay salaries, the rating agency said.

“All companies will substantially benefit from the moratorium as the median salary cover is 0.65 time. About 40 per cent of them even had a cover of over one time, indicating the benefit from moratorium exceeds employee cost during the lockdown,” its senior director and head analytics Subodh Rai said.
 

These firms are from sectors such as electricity generation, agricultural products and trading and have high financial leverage, which maximises their gains from moratorium, but relatively low employee-cost intensity, Rai said.
 

The report said automobile dealerships could face some challenges in salary payouts despite materially benefiting from the moratorium.