From airlines to automobiles, businesses see washout in April amid lockdown

Broad swathes of business from mobile device manufacturers to consumer electronics, from airlines to restaurants, and from automobiles to soft drinks and hotels have together lost more than a staggering Rs 1.65 trillion in revenues in April because their sales and production hit zero or near zero as a result of the lockdown, raising serious concerns about their future for FY21.
 

According to the Indian Cellular and Electronics Association of India, the loss in revenues for mobile device manufacturers during the lockdown has been Rs 20,000 crore and around Rs 2,500 crore for PC-laptop players. The loss has been accentuated by the fact that the government initially decided to allow the sale of mobile devices online (as essential commodities) after the lockdown was lifted partially in mid-April but later withdrew the order fearing it would impact physical stores which would still be closed.
 

Considering that around 40 per cent of mobile phones are sold online, this was a huge blow. Says Hari Om Rai, director in Lava Mobiles: “Even after production starts, demand will take a long while to become normal and there will surely be a lot of downgrading.”

In aviation, airlines say the loss in  revenue for domestic companies has been around Rs 8,000 crore in April. A top airline executive said: “The adverse impact is simple. You have zero revenues. But your fixed costs, which is salaries and leases, are around 25 per cent of revenues and these have to be paid even if there are no revenues.  So the only thing you can do is preserve cash, renegotiate leases, and bring down your fixed costs.”

The Society of Indian Automobile Manufacturers estimates a revenue loss to the tune of Rs 69,000 crore.
 

In consumer electronics, the revenue loss is estimated to be over Rs 22,500 crore for April which is a key season for the sale of air conditioners and refrigerators and even televisions (the IPL).

As much as 20 per cent of TV sales, that is Rs 6,000 crore, happen in this month.  “But this year is an anomaly by every count. No activities could take place in April with a lockdown in place and the IPL getting postponed”, said Avneet Singh Marwah, CEO of Super Plastronics.
 

Nearly one third of refrigerator sales, about Rs 8,000 crore, were expected to take place in in April but manufacturers have drawn a blank. Air conditioners usually notch up Rs 8,500 crore in sales in April as the temperature begins to rise. “However, this time, from large chillers to home AC units, no sales have happened in April. Now we expect the market to shrink by 30 per cent this year,” said Vir Advani, vice-chairman and managing director of Blue Star.
 

What’s worse is the lack of any ray of hope. Organised and unorganized restaurants don’t anticipate any improvement in the next few months. Rahul Singh, former president of their apex body, the National Restaurants Association of India, said: “Our sales have been zero. We estimate the impact is as high as Rs 34,500 crore in April as revenue foregone. And we have no clue about the future. It is a complete mess.”

Singh says that quick service restaurants’ share of the total revenues is around Rs 3,300 crore every month and they are delivering online. But they are working at 10 per cent of their normal sales numbers.
 

No one has been spared the torture. According to HVR Research, both organized and unorganized hotels are expected to suffer a revenue loss of over Rs 81,000 crore for 2020. For April, occupancy has fallen in organised hotels from 65 per cent in April 2019 to a mere 6-9 per cent last month and the revenue loss for April for both organised and unorganised hotels has been Rs 10,000 crore. “We are in the dumps. We must realise the virus will not go away and have to look at a middle way by which the economy is set in motion gradually,” said J B Singh, president and CEO of InterGlobe Hotels.
 

Soft drink players have also been hit. Coke’s own bottling operations, as well as Varun Beverages which is the sole bottler for PepsiCo’s beverages, were closed in April. “Nearly 40 per cent of our soft drink sales comes from April to June. We expect to take a revenue hit of at least Rs 4,000 crore in this period," said a senior executive of one of the multinational beverage players.