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Coping With Covid-19
BW Businessworld and TechSci Research conduct a perception-based survey among middle and senior management personnel across six key industries to gauge the impact of Covid-19 on them
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Industry sectors such construction, automotive and engineering and industrial equipment have been adversely impacted by the Covid-19 pandemic, says a BW Businessworld-TechSci Research survey.
BW Businessworld along with TechSci Research conducted a survey among middle and senior management of companies to measure the impact of Covid-19 on Indian industries. The perception-based survey takes into account the knowledge and experience of respondents working in companies across sectors. The ground work, research and survey was executed by TechSci Research
The survey, which covered 153 companies across six industries, however, found that sectors such as IT software and hardware, consumer food and durables, and Telcom equipment and service providers were not as severely impacted as the others. Here, the respondents were of the view that whilst the pandemic caused distress to their businesses, the impact was only ‘somewhat adverse’.
Adversely Impacted Categories
Out of the total number of respondents surveyed in the construction industry, a whopping 70 per cent said the sector was ‘adversely’ impacted by the Covid-19 pandemic. Similarly, 65 per cent of respondents from the automobile and ancillary companies admitted that the outbreak had adversely impacted the sector. Around similar percentage (63 per cent) of respondents from the engineering and industrial equipment companies agreed that the pandemic adversely impacted their industry. These respondents also agreed that revenue targets were not reached, expenditures increased and expansion plans etc. got severely hampered.
However, these respondents differed as to the time period for recovery of their respective industries. While only 55 per cent of the respondents from the construction industry said it will take more than a year to recover, a larger chunk of respondents (75 per cent) from the auto industry said it will take more than a year to recover, whereas 74 per cent of respondents from the engineering and industrial equipment sector put the recovery time from 6 months to 12 months to set in after one year.
On the question of adverse impact on revenue due to Covid-19, 60 per cent of those in the construction industry said that annual sales will be down 26-50 per cent based on their analysis of the revenue trends during Q1 of FY2020-21. In the auto sector, 40 per cent of the respondents believed that sales would be down by 26-50 per cent. But half of the respondents expected the sales to be down only under a quarter (1-25 per cent) for 2020-21. In the engineering and industrial equipment industry, 67 per cent of respondents were confident that sales will only be down by 1-25 per cent for the full year as they expected the recovery to set in within a year’s time.
On the question of hiring, a whopping 85 per cent of the respondents in both construction industry and the engineering and industrial equipment industries felt that there will not be any new hiring for 3-12 months. Only 5 per cent of the respondents belonging to the construction industry said that they were doing selective hiring even during the pandemic. In the automobile industry 80 per cent respondents believed there wouldn’t be any new hiring for at least a year.
On productivity getting impacted, 85 per cent of the respondents in the construction sector said that the employees are now less productive at ‘higher employee costs’ due to the nature of business, which requires personal presence and shortage of skilled resources in the industry. In the automobile sector, it was the quite the opposite. Around 85 per cent of the respondents said that employees are now less productive but at ‘lower employee costs’ due to compensation reduction measures taken by companies resulting in salary cuts. In the engineering and equipment industry, about 74 per cent of the respondents said that the employees are now less productive at higher employee costs. Why? Due to the nature of business, which requires personal presence. And of course there is a shortage of skilled resources in this industry.
The construction sector expects to see an overall annual marketing budget cut of 15-20 per cent and a large backlog of unfinished projects. Respondents felt that there would be significant cuts in the employment budget in terms of less hiring, salary cuts, etc.
Due to nationwide shutdown the automobile industry has experienced a major adverse impact. When asked about the business impact on the industry, the respondents said that in April 2020 for the first time in history they clocked zero sales, while in May, the players’ experienced a 70-90 per cent fall in demand compared to May 2019. The respondents said the decline in sales will continue till the festival season in October 2020 and production related issues due to skilled labour availability disruptions. The respondents said they expected permanent layoffs for 20 per cent of the workforce in the industry. The engineering and equipment industry was no different. The respondents here said they expected a 10-15 per cent cut in annual marketing budget and 8-10 per cent layoffs this year.
‘Somewhat Less’ Impacted Categories
In the IT industry, 65 per cent of the respondents termed their sectors as somewhat less impacted whereas for consumer goods it was 60 per cent and 50 per cent for telecom equipment & services. As to the recovery of their respective sectors, a whopping 81 per cent of respondents on an average from three categories believed recovery would set in less than 12 months.
Around 60 per cent of the respondents, on an average, from these three categories said they expected the revenue impact of the Covid-19 pandemic to be under 25 per cent for the current financial year. A small percentage of the respondents in each of the three categories of companies said they expected the sales to grow this year. Only 8 per cent of the respondents on average believed that revenue may decline by 50 per cent compared to previous years. As to the impact of Covid-19 on hiring, an average of 17 per cent of respondents across the three categories said ‘selective hiring’ was an ongoing activity even during Covid-19. And no one believed there won’t be any hiring at all for a year. In fact, over 44 per cent of the respondents across the three sectors believed that hiring activity will be on. And none believed that there won’t be any hiring for a year.
Was there a business impact due to coronavirus? In the IT industry, those that had end consumers in travel, tourism, restaurants, hotels etc. incurred major losses. Also, respondents said cyber related attacks on personal computers and routers had witnessed a significant increase which was having a positive impact on the business of cyber security providers. Also, 65 per cent of the respondents said their companies were planning for marketing budget cuts to limit the adverse impact of Covid-19 on profitability. However, they also warned that if the impact on business is higher than expected mainly led by decline in business from the US and Europe, then the marketing budget cuts will increase and may continue for three to six months. What about the employment budget cuts? Those in the IT sector said all campus recruitments were ‘on hold’ now. About 65 per cent of the respondents mentioned that if the pain at the client side continues, a salary cut of 10-15 per cent will be inevitable.
The consumer goods and the telecom sector expects cuts of 80 per cent and 75 per cent in their marketing budgets. The respondents in the consumer goods and durables sector are expecting to see job cuts and lay-offs of 5-10 per cent in the industry.
In the telecom sector, about 70 per cent of the respondents said the employment budget will be affected due to the adverse economic impact of coronavirus and a few specific roles will become redundant. “This will result in both salary cuts and layoffs,” they said. They felt that salary cuts will be in the range of 10-25 per cent while layoffs are expected to be 5-7 per cent, if the situation worsens. However, the remaining 30 per cent opined that there will be no impact on the employment budget. That should be something to cheer about.
This article was first published in the print issue of (25 June- 09 July) BW Businessworld. Click Here to Subscribe to BW Businessworld magazine.