Stock Market

As China sneezes, India Inc catches cold: Companies that may take a hit

   Download Android App    Share in      FullScreen   CheckVideos

NEW DELHI: India Inc seems to have started seeing the impact of trade disruption following the coronavirus outbreak.

In their latest updates, companies from across sectors are sounding concerned about possible supply chain disruptions. Chennai-based TVS Motor this past Monday said the outbreak impacted the supply of certain components, thereby hurting 10 per cent of its planned February production.

The BSE Auto index has plunged over 10 per cent amid the ongoing selloff, while Bajaj Auto has declined 5 per cent during the same period. Other auto majors like Hero MotoCorp, M-M, Maruti Suzuki and Tata Motors have dipped 5-9 per cent in last six sessions. Dun - Bradstreet’s Economy Observer report said manufacturing companies could face production disruptions if this outbreak gets prolonged and their supply chains are not restored to normalcy. Tata Group hospitality chain The Indian Hotels Company (IHCL) said there was an impact from the coronavirus spread on business but it was difficult to quantify as yet.

“It (impact) could be less this quarter, and more going ahead.

People are travelling less.

People are worried,” Puneet Chhatwal, Managing Director and CEO, Indian Hotels, told reporters. Many domestic players have of late cleared the air on their dependence on China.

Somany Ceramics said its exposure to China was limited to machines and spare parts. Gabriel India last week said the company was not impacted much by the virus outbreak, even though there has been some impact on the industry.

Production, it said, has already started in China as told by the company’s suppliers. Majority of auto ancillary players saw erosion in investor wealth since February 19.

Shares of Setco Automotive have declined the most at 15 per cent, while Rico Auto, Rane (Madras), Motherson Sumi and Gabriel India have plunged between 4-14 per cent. China accounts for 7 per cent of revenue for Motherson Sumi.

The company in its earnings conference call said shortage of components sourced from China could impact production. “The ideal time for a shipment to move from the Chinese factory to the Indian factory is 36 days.

Hence any supply chain disruption would be in effect after the estimated time slack,” Centrum Broking said. The brokerage said current inventories for most domestic players remain at sufficient levels.

However any elongation of the shutdown is most likely to impact Indian players. “Our study shows core import components such as electronics, chemicals, drugs, machinery, metal products and auto components that comprise over 70 per cent of total imports from China, remain highly vulnerable to the ongoing disruption in Chinese activity,” Centrum said. Paint major Berger Paints said it does not expect a significant impact on its business.

The company’s share price has declined 2 per cent in last six sessions, while BSE benchmark Sensex has declined nearly 7 per cent. In its conference call on February 12, VIP Industries said the luggage industry globally is dependent on China for luggage - bag-packs. “If production doesn’t restart in one to two weeks, it will impact supply chain of the luggage industry globally,” Narnolia Financial Advisors noted it as saying. Shares of VIP Industries dipped 9 per cent to trade at Rs 416 on February 28 against Rs 457.30 on February 19. Container Corporation of India said its volumes are negatively impacted by coronavirus while Allcargo Logistics said its management was not yet clear on the impact on its business “as some of the businesses has started and some closed,” Narnolia noted. IT firm Hexaware said coronavirus might have a negative impact on its business.

The travel vertical accounts for 10.3 per cent of its revenue.

Share price of the company declined over 3 per cent to Rs 357.60 on February 27 from Rs 369.90 on February 19. Coronavirus epidemic is fast turning into a pandemic, with cases outside China, especially in South Korea, Italy and Iran on a rise.

This has raised concerns over across several industries such as auto component and pharmaceuticals. Coronavirus death toll in mainland China has increased to 2,663 with 77,658 confirmed cases.

South Korea now has 893 cases in all.

Japan (850), Italy (229), Singapore (89) and Hong Kong (81) also have reported substantial rise in virus cases. About 72 per cent of Indian companies in China have presence in cities like Shanghai and Beijing and in provinces of Guangdong, Jiangsu and Shandong.

Further, their business partners are located across China.

These companies operate across sectors such as industrial manufacturing, manufacturing services, IT - BPO, logistics, chemicals, airlines and tourism, CII said last week.




Unlimited Portal Access + Monthly Magazine - 12 issues-Publication from Jan 2021

Buy Our Merchandise (Peace Series)

 

Contribute US to Start Broadcasting


It's Voluntary! Take care of your Family, Friends and People around You First and later think about us. Its Fine if you dont wish to contribute and if you wish to contribute then think about the Homeless first and Feed them. We can survive with your wishes too :-). You can Buy our Merchandise too which are of the finest quality.

Debit/Credit/UPI

UPI/Debit/Credit

Paytm

STRIPE

Details
Category: Stock Market


21