A third of NSE manufacturing companies back at work

MUMBAI: About a third of non-service, manufacturing companies listed on the NSE have resumed operations partially or fully since mid-April, but demand is weak and disruptions continue to plague operations.

Data collated from filings by companies listed on the NSE show that 410 out of 1,300 non-service companies such as ITC, Maruti Suzuki, Hero MotoCorp, Asian Paints, Tata Motors, Ashok Leyland, Whirlpool India, Bosch, Welspun and Tata Chemicals have resumed operations. Most cement, tyre, chemicals and pharmaceutical companies also resumed business partially between April 20 and May 22. The Centre had allowed businesses to restart operations gradually, by partially lifting restrictions from April 20. Movement of goods traffic had also been eased.

Corporate executives said their teams were monitoring market demand as they learn to live with the new normal. “From the lessons learnt so far, we see an opportunity to improve our operating capabilities and review our growth strategy,” said a spokesperson for Tata Chemicals. “We were able to ensure uninterrupted despatch of products to the markets through railways.”

Cigarettes-to-hotels-to-FMCG major ITC became the latest large company to announce restart of factories making non-essentials, with limited workforce.


Pickup in economic activity
A few indicators suggest a pickup in economic activity since the lows of mid-April though a full-fledged recovery is still a long way off. A Credit Suisse report said power demand, which had plunged 27% year-on-year in mid-April, is down only 14% in May. Similarly, e-way bill generation, which had fallen 80% in April, is now down only 60%. Traffic congestion in metros is still 15-40% of normal.

Though auto companies have restarted production, vehicle registrations are still down 90% year-on-year as most of the dealers are yet to resume operations. Cement companies are operating at 50% capacity as dealers are unwilling to stock up due to demand uncertainty. However, cement sales in rural areas are back at 65-70% of normal.

Domestic steel price has corrected by Rs 1,000 per tonne this week in New Delhi as the industry is facing several issues, said analysts.

“Our channel checks indicate that trades are still at about 15-20% of normal level due to absence of labour, disruption in payment cycle and demand uncertainty,” said Amit Dixit, analyst, Edelweiss Securities.

Mohit Anand, MD, Kellogg South Asia, said the lockdown has brought challenges, pertaining to labour, transport and permissions to operate, which were unique to each city and state.

“We have re-opened our facilities and are now ready to gradually ramp up production back to normal level to cater to the demand,” he told ET. “Innovative solutions such as over-the-counter sales by our distributors, tele-calling thousands of stores, midnight and pre-dawn working hours to deliver food to where it was needed… It has been humbling to be a part of their teams in this crisis.”

Though the government has taken several steps to alleviate the near-term liquidity challenges of various sectors, the lack of any meaningful fiscal stimulus implies that demand regeneration will take time, said analysts.

“We expect the central and state governments to proactively open the green and orange zones for more economic activities,” said Sanjeev Prasad, MD, Kotak Institutional Equities. “At the same time, it is imperative that state governments focus on containing the contagion in urban centres, as an economic recovery will remain distant until these centres — the major drivers of consumption — see resumption in ‘normal’ economic activities.”