Maharashtra Covid restrictions to impact auto sales: Icra

Restrictions on dealership operations could have a short-term impact on liquidity, as most dealerships rely on inventory funding facilities which have a pre-defined payment period and they may require refinancing to tide over possible deficit in cash flows.

By:April 10, 2021 7:29 AM

The Maharashtra government’s strict restrictions to curb the spread of Covid-19 is likely to impact automobile sales as dealerships, covered under Shops & Establishment Act, will have to remain shut till April 30, ratings agency Icra has said.

Ashish Modani, vice president, Icra, said that festive periods like Gudi Padwa and Navratri, falling in April this year, account for a fair share of annual vehicle sales, especially in Maharashtra. The lockdown restrictions will impact vehicle sales and, thereby, financial performance of auto dealers, who have struggled during the past one year, Modani said.

Restrictions on dealership operations could have a short-term impact on liquidity, as most dealerships rely on inventory funding facilities which have a pre-defined payment period and they may require refinancing to tide over possible deficit in cash flows. Support from OEMs as well as financiers thus remains critical for Maharashtra-based automobile dealerships in the interim period, Modani said.

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