India’s capital goods sector was already struggling due to the sluggishness in the economy. Now, things are far worse with the covid-19 pandemic-related lockdown.
There is an immediate pressure on firms’ working capital needs, given the drop in revenues. What’s more worrisome is a delayed macroeconomic recovery that would hurt order flows and earnings for several quarters ahead.
The pandemic has struck when the sector is battling poor order flows from the government as well as the private sector. In addition, the credit cycle to customers is elongated due to the liquidity crunch.
The upshot: with project execution and factories now under lockdown, high fixed costs and payment delays from customers would exert more pressure on already