Covid-hit contact-intensive businesses see life support in RBI's measures

However, the businesses also believe that more is required to revive the pandemic-hit sectors

Top officials at companies belonging to the “contact-intensive” sectors such as hospitality, travel, beauty and wellness, aviation and ancillary services, car repair services, shared mobility, along with industry associations, lauded the latest measures of the Reserve Bank of India (RBI), adding that the liquidity window offered will go a long way in reducing the mortality rate of the commercial establishments that are financially vulnerable.
 
However, given the impact of the pandemic on businesses, this might not be enough. The second wave has left the “contact-intensive” businesses gasping for breath amid Covid-induced curbs.
 
“We are still looking at the caveats in fine print. But overall, it will offer us a much-needed breather,” said KB Kachru, vice-president of the Hotel Association of India (HAI). It has given an additional lease of life to several hospitality establishments that are on the brink of closure. Ailing hotels will be able to save related jobs, lives and livelihoods. Hotel loans are less likely to become NPAs. However, HAI will continue its efforts to get a one-time settlement of the loans, said Kachru.
 
Anurag Katriar, president, National Restaurant Association of India (NRAI), said, “One of our prime demands was of liquidity for restaurants, since eateries were hit hard during the second wave. The move should help restaurants.”
 
The first wave saw nearly 35 per cent of restaurants shut permanently as eateries struggled with lockdowns and staggered openings, industry sources said. Another 30 per cent shut shop during the second wave this year, estimates suggest.
 
Vinutaa S, assistant vice-president and sector head, ICRA, said the liquidity window will give some relief, but given the “inherent stress in the hospitality space and the fact that credit risk will continue to remain with banks unlike with ECLGS, the actual benefit for the sector from the aforesaid liquidity window remains to be seen”.

 
The travel and tourism sector that has been hit equally hard has also been making representations to the government, seeking relief. “This measure by the RBI helps alleviate the stress in the sector, provides much-needed support to the industry participants, and allows the industry to be well-prepared to meet customer needs once the impact of the pandemic eases,” said Aditya Agarwal, CFO, Cleartrip.
 
“We had requested for a special priority and liquidity status for up to at least 2024, considering that this sector is the worst-hit and recovery will only happen by then,” said Jyoti Mayal, president of Travel Agents Association of India (TAAI).
 
Accordingly, it had asked for a tourism corpus to be set up at closest to repo rates — never before done for any sector. “Hopefully the fine print and the execution of the commercial banks on the ground are equal,” said Mayal.
 
Another stressed sector has been the beauty and wellness market, which, like eateries, has been shut. Bhupesh Dinger, chief operating officer, Enrich Salons, said the on-tap liquidity would help spas and salons. “The sector has been hit hard and needed support. We welcome the move,” he said.
 
Following the development, shares of hotels, restaurants and its related business companies rallied up to 10 per cent on the BSE in intra-day trade. At the end of the trading hours, though, some of the gains were erased.
 
“The regulator has been announcing relief measures in phases. Hence, this might be the first phase of announcement. Therefore, if required, the RBI may announce more support measures going forward,” said Deepak Jasani, head of retail research at HDFC Securities. The intention, he said, is to support the sectors that are under severe stress, but will benefit from the unlocking of the economy.
 
With inputs from Nikita Vashisht