Over half of Indian firms 'vulnerable' on wage payments: Crisil

Over half of Indian companies are "vulnerable" from a wage payments perspective, which will lead to a sharp cut in paychecks and delay the overall economic recovery as demand resumption takes time, ratings agency Crisil said on Friday. Ashu Suyash, the managing director and chief executive of the agency, said it has done an analysis of 40,000 companies having a collective wage bill of Rs 12 lakh crore, which revealed the grim situation.

"We see vulnerability in 52 per cent by size (of wage bill) and 68 per cent by numbers (of companies). This should not result in all layoffs or redundancies, but a sharp cut in the paycheck. That simply means that recovery is going to be slow," she said at an economics conference organised by SBI.

The comments concur with reports of numerous companies resorting to layoffs. Multiple efforts are being mounted from the policy side to arrest the trend, with reviving demand being the topmost priority.

She further said the agency expects companies' revenues to fall by 14-17 per cent and it shows that demand is "significantly impacted".

Suyash said the economy was anyways facing problems with slowing consumption, which had put a question mark on employment growth, adding that the pandemic will slow down recovery.

"We are actually saying that even in three years, we are not going to come back to the levels from a GDP growth perspective. There will be a 10 per cent permanent loss of GDP," she added.

She, however, said the impact on companies will not be as bad as that seen in the aftermath of the global financial crisis of 2008. This is because the number of companies which can be classified as highly leveraged are a fraction of what they were then on the back of massive de-leveraging of the last four years.

The strength of a company's balance sheet and liquidity position will be the key factors which will determine a company's ability to withstand the ongoing difficulties, she said.

The Story has been carried from PTI feed.