Out of the 282 total responses, the confidence of the maximum (179 responses or 64 per cent) industries fell during the first quarter.
The confidence of the industry severely tumbled in the first quarter of the current fiscal year 2020-21. CARE Ratings’ Industry Confidence Index (CICI) fell to 58, the lowest score in the past nine quarters. The index score deteriorated due to the massive pandemic that started globally and gradually spread in India since mid-March 2020. Out of the 282 total responses, the confidence of the maximum (179 responses or 64 per cent) industries fell during the quarter. Of the 47 industries, 39 industries witnessed a decline in revenue growth, 21 industries witnessed a fall in operating margins, 25 witnessed adverse fluctuation in pricing, 29 industries witnessed a fall in the modified credit ratio, and 38 industries witnessed a deterioration in interest coverage ratio, on-year during Q1 FY21.
It is to be noted that the industries’ confidence was being measured on the basis of their financial performance, creditworthiness, and expectation. Revenue growth, operating profit margin, pricing power, and interest coverage were part of the financial performance. The confidence level of industries related to vehicles, automobile ancillaries, retail, hospitality and tourism, edible oil, textiles, cement, coal, aluminium, copper, crude oil, etc tumbled the most. Care Ratings underlined that the recovery of such industries is not expected in the myopic future.
On the other hand, tractors, agrochemicals, fertilizers, drugs and pharmaceuticals are the industries where at least 4 out of the total 6 parameters have witnessed an improvement in performance in the first quarter. These are the best performing industries during the unfortunate times of the coronavirus pandemic.
Meanwhile, the current fiscal year started with the gradual spread of Covid-19 infections in India and brought a sudden halt in economic activity in the months of April and May, with gradual opening up in June. The stringent lockdowns led to a complete shutdown of most business operations for nearly 40-50 days of the quarter. However, the rating agency has estimated that the index value may remain low and the GDP growth is likely to turn positive in Q4, which could be the turning point for CICI.