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Companies cut Capex plans to fulfill cash requirements

MUMBAI: Everything and Everyone got Stuck by the lockdowns caused due to Coronavirus pandemic situations all over the world. As a result of this lockdown event, India Inc Has come with a new strategy of financial prudence for the fiscal year 2020. They observed that there is a great need to review their capital expenditures (Capex) planning because the incomes are declining and the costs remain constant. Nowadays Almost all corporate bodies are strictly trying to withstand themselves by the new mantra of “Cash Is King”. They have delayed their investment plans and reviewing their sales budgets and coming forward with their new dynamic and realistic cost plannings to give effect in post-COVID-19.

The finance director of JSW Energy, Jyoti Kumar Agarwal said that this COVID-19 pandemic led us to review all of our Plannings whether it is operational or strategic planning. We have been reviewing our planning to sustain ourselves and our stakeholders since the lockdown. They have decided to put off their discretionary costs/expenditures that are of non-essential nature like travel costs and expenses.

They are also focused on rapid development by having a nimble approach with the help of redrawing their strategic road map to give effect to a short period of time. While they also have maintained sufficient liquidity to last through a prolonged dislocation. They said that we would never ever prefer to conserve their capital as much as possible, given the unprecedented nature of the situation.

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There are also some Industrial sectors like cement industries, they move in tandem with the Gross Domestic Product Growth numbers. Sandeep Ghose, Birla corporation COO said that ” we are expecting that this quarter of fiscal years 2020 to be proved as a damper for the Industry and we hope to see some rigid signs of revival probably in the third quarter of the fiscal year 2020. So finally it was predicted that the normalcy could be achieved only in the fourth quarter of the fiscal year 2020. “Costs that are postponable, would be postponed” There is also a relief of expenses on the end of marketing as they are not selling anything so they don’t need to spend money on ground market activities.

Power and transportation add high costs to the expenses and budgets for the cement industry, however labor available in single-digit rates. Birla corporation COO, Sandeep Ghose said that  “If plants are not running at their optimal capacity then the cost of production will go up. While the market is not able to pay higher prices for the cement bags, players, which operate on lean margins, would be in a bind,” 

At the other end, The High Enhancement of M&A activities would be seen in the growth sectors like special chemicals, electronic and electricals’ manufacturing, pharmaceuticals, healthcare services, and medical consumables.

There might be a gradual increase in demand in beaten-down sectors like automobile components, commodity packaging as well as metal processing. Some sectors would have better gradual ups and some might end up with downfalls as well. However, finding a buyer in such situations would be very difficult with the same pricing strategies.

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SACHIN AHIRWARhttps://personal-finance.in/
Hey, I’m Sachin. I’m a Blogger living in India. Guide for Personal Finance Planning & financial planning, Tax, Investment, Managing Money, Insurance, Retirement, Real Estate and Loans & more.

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