The divestments are being planned to mobilise funds for tiding over liquidity issues and also investments, the survey of 30 companies by EY said.
Reeling under the financial impact of the pandemic, three-fourths of companies have been forced to look at divestment of what they consider as non-core assets, an annual survey by a consultancy firm has found out. The divestments are being planned to mobilise funds for tiding over liquidity issues and also investments, the survey of 30 companies by EY said.
It can be noted that the economy contracted by 7.3 per cent in FY21 because of the reverses of the pandemic, and the continuing impact because of a newer wave means the economy is unlikely to achieve the low-base fuelled double-digit growth rate in FY22 either.
The survey said 73 per cent of respondents are planning to divest in the next two years, as the COVID-19 pandemic has created a need for capital to support business requirements.
“Timely divestment of assets can provide companies with the much required funds to manage liquidity and fuel growth during this crisis,” it said.
The consultancy firm’s partner Naveen Tiwari said divestments can help companies to “build resilience” during the crisis and also increase focus on the core business.
One of the biggest challenges faced by company chief executives is identifying the right time to divest assets, the survey said, pointing to a finding where 70 per cent of surveyed companies said that they held onto assets for too long.
A successful divestment requires that the process be viewed as a part of the corporate strategy rather than a one-off decision. A clear view on strategic alignment of each business, supported by rigorous portfolio reviews can help CFOs identify the right divestment candidates and sharpen the focus on core businesses, the consultancy firm said.