September 23, 2021

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Pandemic hurts working cap administration, top-500 cos’ money cycles stretched by 6 days: EY

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The pandemic has impacted the working capital administration for firms and stretched top-500 listed firms’ money cycles by six days, a examine by a consultancy agency mentioned on Monday.

The pandemic has impacted the working capital administration for firms and stretched top-500 listed firms’ money cycles by six days, a examine by a consultancy agency mentioned on Monday.

Within the 12 months ended September 30, 2020, companies in India noticed a rise within the cash-to-cash cycle by 6 days year-on-year, the examine of top-500 listed firms by EY, mentioned.

Companies in India have a chance to free as much as Rs 5.2 lakh crore tied up in working capital, which will help companies rebound a lot strongly from the disaster, it added. The examine mentioned 69 p.c of firms prolonged their payables to offset the results of the pandemic on working capital.

It defined that the pandemic-induced lockdowns resulted in elevated stock balances and decreased collections for firms. Prudent firms resorted to the technique of extending payables with the intention to handle disruption and protect money.

Giant and medium enterprises proceed to be extra environment friendly in managing their working capital necessities. Larger bargaining energy mixed with efficient enterprise processes to handle working capital for giant companies resulted in a working capital cycle of 29 days shorter than the small enterprises, it added.

9 out of 12 sectors, together with metals and mining, oil and fuel, and prescribed drugs noticed a rise in days of stock, it mentioned.

From a sectoral perspective, the ability sector has witnessed a 34-day deterioration in cash-to-cash cycle, oil and fuel by 10 days, and, engineering and EPC (engineering, procurement, and building) providers by 17 days, it mentioned.

Some sectors, like cars (13 days), chemical compounds (12 days), and cement and constructing merchandise (7 days) have seen an enchancment as properly, it mentioned. 

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