Thread by @ViaWealthy

How COVID-19 is playing out in different sectors in India ? - Thread

India's goods trade dependency on affected countries is significant. Eurozone, China & Rest of Asia Pacific (which are facing atleast 2% hit in their growth forecasts) - accounts for ~48% of imports & ~50% of exports.

S&P Global foresees a recession in the US and the Eurozone, and has its forecast for China’s growth slashed to 2.9% from 4.8%.

Auto Components:

With top 15 countries accounting for ~52% of the exports and they are going to get impacted. MSME constitute 25-30% of auto component industry. Key raw materials steel & alluminuim will see sharp correction in prices.

Consumer Durables:

India imports 45-50% completely built units of consumer durables (mainly from China) and has high import dependency for components. Supply disruptions have already led to scarcity of components / units, thus increasing prices.

Airlines:

International passenger traffic constituting 30- 35% of total passenger traffic in India to get severely impacted. Top 15 affected countries account for more than 25% of total international passenger traffic from / to India.

ATF constitutes 30-40% of total cost. With Brent crude prices expected at $38-43/ barrel for 2020, lower fuel price provides some cushion. Typically, 1% dip in ATF price would increase EBITDAR margins by 45-50 bps

Hotels:

Occupancies in March were sub-30%. Curbs on visa till April 15 and progression of Covid-19 globally will have a severe impact on influx of foreign travellers, bringing down occupancies of hoteliers.

Fall in occupancy below a certain level (60-65%) will push up operating costs, eroding margins.

Check the message of Marriott Global CEO here:

https://twitter.com/MarriottIntl/status/1240639160148529160

Paper:

Due to limited availability of wood pulp & wastepaper, imports form more than 40% of total pulp requirement. Share of Top 15 impacted countries is ~50%. Thus, supply chain disruption is limited.

Textiles:

India is one of the largest cotton producers, has a high share in global trade of cotton yarn. Almost 20% of total production is exported. Hence, the slowdown in global demand will directly impact cotton yarn manufacturers.

While cotton prices may drop sharply, yarn players may not benefit as demand slumps. MSMEs’, constituting ~75% of the spinning sector, are expected to be impacted adversely due to lower export demand.

Jewellery:

Over 50% of industry is export dependent. Of this, 84% is the share of Top 15 infected countries. India depends largely on imports for gold & diamonds, and imports 20% of world trade. Of this, India imports more than 60% of products from Top 15 affected countries.

IT Services:

The Indian IT services sector, which derives more than 80% of its total revenue from exports, with higher share of the US, the EU and the UK, will see challenging times, given cuts in discretionary spend, travel restrictions, and closures of offices.

Demand-side impact can emerge from economic slowdown, especially in the US and the EU, where new deal flow will be slower, especially in H1 fiscal 2021.

Travel restrictions could lead to delays both in terms of new deal signings/ closures and execution of projects.

Leather Goods:

China accounts for ~35% of the global leather exports, whereas India accounts for only ~3%. India's current capacity utilisation for leather manufacturers is at 60-70%. With weak global demand, there is hardly any benefit that India may be able to garner.

Leather exports to be impacted due to lower demand from major importing countries (Europe and US contribute to ~70% of the demand). Domestic demand may also be impacted in the first quarter of the financial year.

Pesticides:

40-45% of the raw material requirement for the manufacture of pesticides is met through imports. In FY19, China accounted for 52% imports. In FY19, exports accounted for 52% of the industry. Major export to US, Brazil, France, Germany, China, accounting for ~50%.

Pharma:

Huge raw material dependency on China (65- 70% of total bulk drugs and intermediate imports).

FY19 exports (both bulk drugs and formulation) total ~$18 billion. Europe and the US account for a major share in overall exports.

Pharma MSMEs’ share in the industry is 35-40% and the current situation is likely to impact them as raw material sourcing will be a challenge.

Seafood:

MSMEs, constituting ~70% of the industry revenue. Exports constitute 30% of the seafood industry; of which, China accounts for 1/5th share.

Top 15 impacted countries form ~70% of India’s export basket. Domestic consumption accounts for ~70% of the seafood industry

Ceramics:

Of total production, 20- 25% is exported. However, only 11% is exported to Top 15 impacted countries. RMs form 45- 50% of total cost. Most of them, i.e., clay & silica, are procured domestically. 80% production is consumed domestically. Domestic players may benefit.

Fertilisers:

Of total consumption, 25% is imported. Import dependency on the Top 15 affected countries is 25- 30%. Fertiliser exports to the affected countries account for ~6% of the total fertiliser exports.

Petrochemicals:

India is a net importer of petrochemicals, with imports accounting for ~20% of domestic consumption. Of this, ~45% of imports is met from Top 15 impacted countries.

Pet chem exports account for ~15% of domestic production. Of this, ~30% exports are to China. However, India’s contribution in world exports is less than 5%; hence, we do not expect any major impact on global trade

Steel:

8% dependency on finished steel imports. Of this, 30-35% is from Top 15 impacted countries. Global steel prices are expected to come under pressure. However, anti-dumping duty will continue to protect domestic steel prices.

Data Source: CRISIL